Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Financial leverage effects Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $17 million in invested capital, has $2.55 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 50% and pays 12% interest on its debt, whereas LL has a 35% debt-to-capital ratio and pays only 10% interest on its debt. Neither firm uses preferred stock in its capital structure.
Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places.
ROIC for firm LL is %
ROIC for firm HL is %
Calculate the rate of return on equity (ROE) for each firm. Round your answers to two decimal places.
ROE for firm LL is %
ROE for firm HL is %
Observing that HL has a higher ROE, LL's treasurer is thinking of raising the debt-to-capital ratio from 35% to 60%, even though that would increase LL's interest rate on all debt to 15%. Calculate the new ROE for LL. Round your answer to two decimal places.
%
The capital budgeting director of Spar Corporation is evaluating a project which costs $280,000, is expected to last for 10 years and produce after-tax cash flows, including depreciation, of $42,500 per year. As soon as the project ends, we will sell..
In a shipping and packing equipment acquisition proposal, Fleeing Stars Enterprise has worked out a deal on the interest rate with the vendor, Outahere Shipping. The equipment is being financed for 10 years with monthly payments.
In 2010 & 2011 Aldi had sales of $200million. in 2012, sales increased to $275million, in 20013 sales increased to $300 million. Calculate the two year moving average & the four year moving average for 2014.
Briefly explain why you are using the computational method chosen. (Hint: you will need to decide to use the APV or WACC formula.
Roundtree Software is going public using an auction IPO. The firm has received the following? bids: Assuming Roundtree would like to sell 2.16 million shares in its? IPO, what will be the winning auction offer? price?
Write down difference between Horizontal and Vertical analysis? Discuss in your own words categories of financial ratios?
What is a mortgage-backed security?
Some MNCs establish a manufacturing facility where there is a relatively low cost of labor, but they sometimes close the facility later because the cost advantage dissipates. Why do you think the relative cost advantage of these countries is reduced ..
Finance: in equity valuation is the discount rate for finding present value (of say a stock with growing dividends) equal to the companies required return (k) or the risk free rate? and why please if its a simple answer. Apply the benefit-cost-ratio ..
Larvey Co. has an unlevered cost of capital of 10.9 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $21,800. The company has $25,000 in bonds outstanding that sell at par and have a coupon rate of 6 percent. What..
What effect does the terminal value have on Net Present Value and Internal Rate of Return? Would omitting or changing the terminal value change your decision?
Project K costs $62,307.93, its expected cash inflows are $14,000 per year for 9 years, and its WACC is 11%. What is the project's IRR?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd