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Daddi Mac, Inc., doesn’t face any taxes and has $305.20 million in assets, currently financed entirely with equity. Equity is worth $30 per share, and book value of equity is equal to market value of equity. Also, let’s assume that the firm’s expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Recession Average Boom Probability of state 0.25 0.60 0.15 Expected EBIT in state $ 6,104,000 $ 11,826,500 $ 18,922,400
The firm is considering switching to a 25-percent-debt capital structure, and has determined that it would have to pay an 9 percent yield on perpetual debt regardless of whether it changes the capital structure. What will be the standard deviation in EPS if the firm switches to the proposed capital structure? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
How does a covered call differ from a protective call in terms of the objective, advantages and disadvantages of each strategy? Disadvantage of covered call: Example for protective call: Advantages of protective call:
A retirement account is established with $500000. Annual payments are recieved at the end of each year for the next 20. the account earns an annual effective rate of intrest of 9.2%. the first payment is of size P and each succeeding payment is incre..
Why do you think construction contracts are normally accomplished by sealed bid procedures? What is a ‘Performance Bond’? What is a Payment Bond’?
If a company has DPS of $3.20 and a retention rate of 20%, what are the company's EPS? A company has revenues of $7.6B and cost of goods sold of $6.2B. If revenues are projected to grow by 5% and COGS by 11%, how much will Gross Profit Margin grow?
If the property owner believes that a 12 percent rate of return should be earned annually on this real estate investment, which option is best?
If the market's required rate of return is 12% and the risk-free rate is 3%, what is the fund's required rate of return?
What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5%
The Olson Company plans to replace an old machine with a new one costing $85,000 The old machine originally cost $55,000 and has 6 years of its expected 11-year life remaining. Calculate the initial outlay associated with selling the old machine and ..
Waldrop Corporation must install $200 of new equipment in its Ohio plant. It can obtain a bank loan for 100% of the required amount at 9% interest on the loan. Assume that Waldrop's tax rate is 34% and that the equipment's depreciation would be $100 ..
Consider the following spot interest rates for maturities of one, two, three, and four years. r1 = 4.6% r2 = 5.2% r3 = 5.9% r4 = 6.7% Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next ..
You own a bond with duration of 4.5 and a convexity of 77. If interest rates decrease by 50 basis points, what is the percentage change in the price of your bond?
The machine will cost $1,000,000.- Compute the net investment (year 0) and the net cash flows for years 1 and 10 for this project.
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