Compare dividends-total distributions to investors

Assignment Help Financial Management
Reference no: EM13923685

Adams Inc. expects EBIT of $50 million if there is a recession, $100 million if the economy is normal, and $150 million if the economy expands. Bellingham Inc. also expects EBIT of $50 million if there is a recession, $100 million if the economy is normal, and $150 million if the economy expands. Adams is financed entirely with equity while Bellingham is financed 50% with debt at 10%. Adams has $200 million in equity; Bellingham is financed with $100 million of debt and $100 million of equity. The tax rate is 30%. Both firms pay out all available earnings as dividends. If there is a recession, compare dividends and total distributions to investors for each company.

Reference no: EM13923685

Questions Cloud

Suprachiasmatic nuclei control wakefulness-body temperature : How could we show that the suprachiasmatic nuclei control wakefulness and body temperature with a periodicity of 25 hours independent of the daily cycling of light
How design flexibility might influence investors preference : How differences in contract liquidity and design flexibility might influence an investor's preference in choosing one instrument over the other.
What is a linear implementation : What is a linear implementation? What kind of implementation of the ADT table is appropriate for retrieval-dominated applications, if the maximum size of the table is known? Why
What is the order m of the maximum : Light of 650 nm is incident on two slits. A maximum is seen at an angle of 4.10 degrees and a minimum of 4.78 degrees. What is the order m of the maximum and what is the distance d between the slits?
Compare dividends-total distributions to investors : Adams Inc. expects EBIT of $50 million if there is a recession, $100 million if the economy is normal, and $150 million if the economy expands. Bellingham Inc. also expects EBIT of $50 million if there is a recession, $100 million if the economy is n..
Time-to-maturity bonds due to coupon repayment uncertainty : Assume that interest rates exhibit an unexpected increase of 1%, in general, we would expect bond prices to         ________. However, we would likely see that the price change of ________ time-to-maturity bonds be greater         than the price chan..
What is the component cost of debt : The Kenny Electric Company's non callable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semi annually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax ..
Karyotype of drosophila melanogaster : The karyotype of Drosophila melanogaster contains 4 pairs of homologous ___________.
Rapid retail comparative statement of income : Rapid Retail Comparative Statement of Income. complete the increase (decrease) in dollars and percent. comment on trends.

Reviews

Write a Review

Financial Management Questions & Answers

  Find terminal stock price using benchmark PE ratio

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. What is the target stock price in five years?..

  What is present value of the annuity

What is the present value of the following annuity? $1,021 every half year at the beginning of the period for the next six years, discounted back to the present at 8.93 percent per year, compounded semi annually?

  What is its degree of operating leverage

Finance Corp has fixed costs of $7 million and profits of $4 million. What is its degree of operating leverage (DOL)?

  What is the price of Treasury STRIPS with face value

What is the price of a Treasury STRIPS with a face value of $100 that matures in 20 years and has a yield to maturity of 7.5 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  List the three primary sources of revenue

List the three primary sources of revenue from a commercial customer's account. In today's economic environment, indicate whether each is growing or declining in use and explain why.

  What is the amount of the free cash flow

How do I figure out this problem? Johnson's Nursery has net income of $42,500, depreciation expense of $1,800, interest expense of $900, taxes of $1,600, additions to net working capital of $2,300, and capital expenditures of $11,700. What is the amo..

  What are the common stockholders residual claims to earnings

Folic acid inc. has $20 million in earnings pays $2.75 million in interest to bondholders and $1.80 million in dividends to preferred stockholders. a) What are the common stockholders residual claims to earnings? b) What are the common stockholders l..

  What is the value of preferred stock

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 8% of its $100 par value. Preferred stock of this type currently yields 7%. Assume dividends are paid annually. What is the value of Rolen's preferred stock?

  Certain common stock currently sells

A certain common stock currently sells for $50. A call option on that stock with X = $50 and an expiration in one year costs $6.41. A put option on that stock, also with X = $50 and a one-year expiration costs $5.42.

  The developer of a new mobile video game

The developer of a new mobile video game needs $50 million in financing for advertising and software programming. What would be the proper debt to equity mix and where would it find this financing. What kind of dilution or floatation costs would be l..

  What is the expected return and standard deviation of return

You manage an equity fund with an expected risk premium of 11.8% and a standard deviation of 32%. The rate on Treasury bills is 3.2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $130,000 in a T-bill money market fun..

  What is the price of the bonds as percentage of pars

Ramstucky Corp bonds just paid their annual coupon of 4%. They mature in 6 years. The required rate of return on the bonds is 5%. So it’s a $10,000 bond selling for $9,000. The call price of the bonds is 102, but they are not callable until after the..

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd