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An unlevered firm has expected earnings of $2, 401 and a market value of equity of $19, 600. The firm is planning to issue $4,000 of debt at 6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?
Compute Mydeco's PE ratio each year from 2009 to 2013. In which year was it the highest? - What was Mydeco's Enterprise Value to EBITDA ratio each year? In which year was it the highest?
A company is considering a 6-year project that requires an initial outlay of $21,000. The project engineer has estimated that the operating cash flows will be $4,000 in year 1, $5,000 in year 2, $7,000 in year 3, $7,000 in year 4, $7,000 in year 5, a..
Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. At what level of pretax cost ..
Top management has accepted the July 19th completion schedule created at the end of Part 2. Prepare a brief memo that addresses the following questions: How much will the project cost? What is the most expensive activity? What does the cash flow stat..
In general the cost of debt capital is lower than the cost of equity capital. It might be expected that firms with high debt ratios would have a lower weighted average cost of capital. Explain at least one reason why this is not the case.
The Poseidon Swim Company Produces swim trunks. The average selling price for one of their is $45.59. The variable cost per unit is $27.46, Poseidon Swim has an average fixed cost per year of $53,331. What is the break even point in dollar sales?
Explain the difference between term and cash value life insurance. Discuss the difference between the following cash value life insurance types: ordinary, variable, and universal.
Massy United Ltd. has been experiencing high levels of growth over the past 5 years and management has decided to retain most of its earnings to finance that intense growth level. If the required rate of return is 14.5 percent what is the market valu..
A stock price is currently $ 30. It is known that at the end of one month it will be either $ 32 or $ 28. The risk-free interest rate is 8%. You write a one-month call option with a strike price of 29$. In a risk-neutral world what is the probability..
Hollywood Shoes would like to maintain their cash account at a minimum level of $54,000, but expect the standard deviation in net daily cash flows to be $4,400; the effective annual rate on marketable securities to be 7.00 percent per year; and the t..
How are Net Present Value (NPV) and Internal Rate of Return (IRR) related? Which is the better decision rule to follow for project selection or rejection? Why? There have been two 'modifications' in discounted cash flow metrics. First, the Internal R..
Fulkerson Manufacturing wishes to maintain a sustainable growth rate of 9 percent a year, a debt-equity ratio of .41, and a dividend payout ratio of 32 percent. The ratio of total assets to sales is constant at 1.34. What profit margin must the firm ..
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