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1) Little Books Inc. recently reported $9 million of net income. Its EBIT was $16.2 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $9 million net income by (1 - T) = 0.6 to find the pretax income. The difference between EBIT and taxable income must be the interest expense. Use this same procedure to complete similar Problems.] Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.
2) In its most recent financial statements, Newhouse Inc. reported $40 million of net income and $720 million of retained earnings. The previous retained earnings were $684 million. How much in dividends were paid to shareholders during the year? Assume that all dividends declared were actually paid. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary.
Winters Inc. management estimates that the company will generate free cash flows from the firm (FCFF) of $12.5 million, $16.8 million and $19.7 million, respectively, over the next three years. After that, FCFF will grow at a constant five percent pe..
Should we continue to record and maintain the value of long-term assets at historical cost or should we adjust their value to more closely approximate market or fair value?
What is the bonds nominal annual coupon interest rate - What is the liquidity premium (LP) on Niendorf's bonds - what is the present value of the cash flow stream
Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments – Project X and project Y. Each project requires a net investment outlay of $10,000, and the opportunity co..
You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 7,000 of these per year from 10 years ( after which time this project is expected to shut down with s..
A manufacturer is designing a new product, and would like to estimate the cost for this product. The production capacity is 500 units per day. The operating cost is $1000 per day. A worker can product 40 units of product per day, and the unit cost of..
What is the Market Value Added (MVA) for this division if the constant growth FCF model applies and the division expects a constant growth in sales and FCFs of 6%?
What financial strategies should you develop as a result of studying personal financial planning? What financial problems might you avoid?
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and the maximum allowable payback is 5 years.
A corporation can have so much financial leverage that it finds it difficult to obtain additional credit. To reduce this problem a corporation may lease, rather than buy assets. This "off balance sheet financing" makes the corporation's financial pos..
A company takes out a loan for $150,000 at a nominal interest rate of 8% compounded monthly. The company agrees to pay back the loan in equal monthly payments for 15 years. What is the monthly payment for this loan? How much interest is paid on the l..
Stocks A, B, and C all have an expected return of 10% and a standard deviation of 25%. Stocks A and B have returns that are INDEPENDENT of one another, i.e., their correlation coefficient, r, equals zero. Stocks A and C have returns that are NEGATIVE..
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