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Get college assignment help at uniessay writers Define the term “incremental cash flow.” Since the project will be financed in part by debt, should the cash flow statement include interest expenses? Explain.

Richmond corp wwas founded 20 years ago

Rebello’s preferred stock pays a dividend of $1.00 per quarter, and it sells for $77.50 per share. What is the effective annual (not nominal) rate of return? The answer is 5.26%.

State of Adaven issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5. Determine the rate of return or current yield on these bonds if they are purchased at the current price of $40.

You have been offered a job with an unusual bonus structure. If you stay with the company,you will get an extra $20,000 every five years, starting five years from now. What is the present value of this bonus if you plan to work for the company for 20 years and the annual discount rate is 6%?

What is the value of a share of stock of HOV iNC. TO AN INVESTOR WHO REQUIRES A 12 PERCENT RATE OF RETURN IF hov’S CURRENT DIVIDEND IS $1.20? aSSUME EARNINGS AND DIVIDENDS ARE EXPECTED TO GROW AT A COMPOUND ANNUAL RATE OF 7 PERCENT.

Cash flows from operations: ElectricEye Technonogies is considering introducing a new line of optic devices. The expected annual sales number of the devices is 10,000 per year; the price is $5,000 per device, and the variable costs of production amount to $2,000 per unit. The fixed costs (including depreciation) are $10 million per year. Depreciation costs are $5 million per year. The marginal tax rate is 40%. What is the incremental annual cash flow from operations for the new line? $25 million $20 million $17 million $12 million

Simplified Micro Devices has a contract to sell 10,000 mousetraps to the Department of Defense (DOD). The mousetraps will sell for $5.50 apiece. However, there is a 20 percent probability that total expenses will be $40,000 and an 80 percent probability that total expenses will be $50,000. What is the expected pretax income for the firm’s DOD sales? $7,000 $48,000 $55,000 None of the above.

Pettigout’s Seafood Supplies is contemplating using its boat for additional duties. If it does so, then the boat will have to be replaced three years earlier than without the additional duties. The current boat will need to be replaced in seven years. If a new boat will cost $350,000, then what is the cost of using the old boat for the additional duties if the cost of capital is 8 percent? $50,000.00 $67,225.34 $137,528.44 $350,000.00

Wk11 Q4 M

Get college assignment help at uniessay writers Wk11 Q5 Homemade Leverage Seether, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 35 percent debt. Currently, there are 8,000 shares outstanding, and the price per share is $55. EBIT is expected to remain at $32,000 per year forever. The interest rate on new debt is 8 percent, and there are no taxes. Required : (a) Allison, a shareholder of the firm, owns 100 shares of stock. Her cash flow is $ ___under the current capital structure, assuming the firm has a dividend payout rate of 100 percent. (Do not include the dollar sign ($).) (b) Allison’s cash flow will be $ ___under the proposed capital structure of the firm. Assume she keeps all 100 of her shares.(Do not include the dollar sign ($). Round your answers to 2 decimal places. (e.g.,16.32)) (c) Suppose the company does convert, but Allison prefers the current all-equity capital structure. She could unlever her shares of stock to recreate the original capital structure by selling ___ shares of stock and lending the proceeds at 8 percent

Wk11 Q6 Homemade Leverage and WACC ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $600,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $300,000 and the interest rate on its debt is 8 percent. Both firms expect EBIT to be $80,000. Ignore taxes. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)) a. Rico owns $30,000 worth of XYZ’s stock. He is expecting a rate of return of __ percent. b. The cost of equity for ABC is __ percent, and for XYZ is __ percent. c. The WACC for ABC is __ percent, and for XYZ is __ percent

Wk11 Q1 EBIT and Leverage Maynard, Inc., has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession, then EBIT will be 50 percent lower. Maynard is considering a $90,000 debt issue with a 7 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. Ignore taxes for this problem. Required: (a) Earnings per share (EPS) for the recession, normal, and expansion scenarios before any debt is issued are $___, $___, and $___, respectively (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)). If the economy enters a recession or expands, EPS will change by ___ percent or ___ percent, respectively. (Negative amount should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to the nearest whole number. (e.g., 32)) (b) Now assume that the company goes through with recapitalization. Earnings per share (EPS) for the recession, normal, and expansion scenarios are $___, $___, and $___, respectively (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)). If the economy enters a recession or expands, EPS will change by percent or percent, respectively. (Negative amount should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)

Wk11 Q2ROE and Leverage Maynard, Inc., has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession, then EBIT will be 50 percent lower. Maynard is considering a $90,000 debt issue with a 7 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. Maynard has a market-to-book ratio of 1.0. Ignore taxes for parts (a) and (b) of this problem. Required: (a) Return on equity, ROE, for the recession, normal, and expansion scenarios before any debt is issued are ___ percent, ___ percent, and ___ percent, respectively (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)). If the economy enters a recession or expands, ROE will change by ___ percent or ___ percent, respectively. (Negative amount should be indicated by a minus sign. Do not include the percent signs (%).) (b) Now assume that Maynard goes through with the proposed recapitalization. Return on equity, ROE, for the recession, normal, and expansion scenarios are ___ percent, ___ percent, and ___ percent, respectively. If the economy enters a recession or expands, ROE will change by ___percent or ___ percent, respectively. (Negative amount should be indicated by a minus sign. Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)) (c) Repeat parts (a) and (b) of this problem assuming the firm has a tax rate of 35 percent. (i): Return on equity, ROE, for the recession, normal, and expansion scenarios before any debt is issued are ___ percent, ___ percent, and ___ percent, respectively (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)). If the economy enters a recession or expands, ROE will change by ___ percent or ___ percent, respectively. (Negative amount should be indicated by a minus sign. Do not include the percent signs (%).). (ii): Now assume that Maynard goes through with the proposed recapitalization. Return on equity, ROE, for the recession, normal, and expansion scenarios are ___ percent, ___ percent, and ___ percent, respectively. If the economy enters a recession or expands, ROE will change by ___ percent or ___percent, respectively. (Negative amount should be indicated by a minus sign.)

Wk11 Q3 Break-Even EBIT James Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 160,000 shares of stock outstanding. Under Plan II, there would be 80,000 shares of stock outstanding and $2.8 million in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. Required: (a) If EBIT is $350,000, Plan I’s EPS is $___ while Plan II’s EPS is $___. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)) (b) If EBIT is $500,000, Plan I’s EPS is $___ and Plan II’s EPS is $___. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)) (c) The break-even EBIT is $___. (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32.))

Alpha Inc has a $1,000 par value bond that was issued ten years ago for a thirty year term. Interest rates were very high at that time and the bond’s coupon rate is 22%. The relevant bond market interest rate is now 10%. All of Alpha’s bonds have a call feature. It allows the company to pay off the bond anytime after the first fifteen years, but requires that bondholders be compensated with an extra year’s interest at the coupon rate if such a payoff is exercised. What is the bond’s market price assuming investors expect it will be called as soon as possible.

A firm’s beta can be estimated from the slope of the characteristic line. The first step is to plot the return on the firm’s stock (y-axis) vs. the return on a broad market index (x-axis). Next, a regression line is estimated to find the slope. a. Go to finance.yahoo.com, enter the symbol for a company of your choice, and click on ” Get Quotes”. On the left-side menu, click on “Historical Prices), then enter starting and ending dates that correspond to the most recent two years. Selec the “Daily” option. Save the data to a spreadsheet b. Repeat the process to get comparable data for the S

What financial information does the current ratio measure? How does the current ratio relate to the other liquidity ratios? Which financial ratios would you use – and how – to determine whether a company will be able to meet its commercial bank loan payments?

Chris’s Fulltime Frenzy issues only common stock and coupon bonds. CFF has a debt-equity ratio of .60. The cost of equity is 13.7 percent and the pre-tax cost of debt is 9.4 percent. The tax rate is 35 percent. What is the capital structure weight of the CFF’s equity?

Calculate the price of a stock with a three-year horizon, when the stock is expected to pay $2.50 per share in dividends each year, and has an expected value of $100 at the end of the third year. The return on comparable stocks is 6%.

What is the WACC for the Gregory’s S. Company? GSC has a bond issue that offers a 9% YTM and this debt accounts for 30% of the GSC’s structure. The after-tax required rate of return on equity is 18% and the GSC has a 30% tax rate.

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November 3, 2019