Comparer and contrast tax-preference-bird-in-hand

Assignment Help Financial Management
Reference no: EM131063056

Telfony Inc. expects an EBIT of $4,000,000 for the current year. The firm's capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The cost of equity is 16%, and the company pays a 10% rate on its $10,000,000 of long-term debt. 1,000,000 shares of common stock are outstanding. For the next year, the firm expects to fund one large positive NPV project costing $2,000,000 and it will fund this project in accordance with its target capital Structure.

A) If the firm follows a residual distrivutuion policy (with all distributions in the form of dividends) and has no other projects, what is its expected dividend payout ratio and the dividend paid out per share?

B) Comparer and contrast tax-preference, bird-in-hand, and clinetele effect theoriesof dividend policy.

Reference no: EM131063056

Questions Cloud

Debt-equity ratio-cost of equity : Weston Industries has a debt-equity ratio of 1.8. Its WACC is 11 percent, and its cost of debt is 10 percent. The corporate tax rate is 33 percent. The cost of equity would be percent if the debt-equity ratio were 2, percent if the debt-equity ratio ..
The current price of a bond is determined : The current price of a bond is determined by which of the following methods?
About the net cash conversion cycle : Some analysts consider a current (or working capital) ratio of less than one to be a positive sign of liquidity, despite conventionally indicating illiquidity. Discuss why some hold this position considering what you know about the net cash conversio..
How many shares will remain after the repurchase : A firm has 10 million shae outstanding with a market price of $20 per share. the firm has $25 million in extra cash (short term investment) that it plans to use in a stock repurchase , the firm has no other finanical investment or nay debt. what is t..
Comparer and contrast tax-preference-bird-in-hand : Telfony Inc. expects an EBIT of $4,000,000 for the current year. The firm's capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. Comparer and contrast tax-preference, bird-in-hand, and clinetele effect theoriesof d..
Time value of money-stock and bond valuation : Two Guidelines and Rubric Overview: For the final project, you will use this case study to prepare a financial analysis report for Home Depot Inc. You will include in your analysis the background calculations and managerial analysis for each of the f..
What required return must investors be demanding : Storico Co. just paid a dividend of $1.60 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Calculate the cost of the preferred stock : Mavis Taylor Corporation has just issued preferred stock. The stock has a 6% annual dividend and a $100 par values, and was sold at $98.5 per share. Flotations costs were an additional $3 per share. Calculate the cost of the preferred stock
Present value of an annuity : Carrie and Miranda earn the same salary. However, Miranda has been far more financially responsible. She pays her bills on time and pays off her credit card debt quickly. but because of her bad credit rating Carrie will be charged 7.5 percent on a 30..

Reviews

Write a Review

Financial Management Questions & Answers

  What is EZCUBEs asset beta

EZCUBE Corp. is 58% financed with long-term bonds and 42% with common equity. The debt securities have a beta of 0.23. The company’s equity beta is 1.17. What is EZCUBE’s asset beta?

  Assume that the risk free rate and the market premium

Assume that the risk free rate is 6% and the market premium is 5%. What are the betas of stocks X and Y?. What are the required rates of return on stocks X and Y?

  What is dividend yield and what is the intrinsic value

ABC Corp. has just paid a dividend of $0.26. ABC has an annual required return of 12%. If dividends are annual and expected to be constant, what is the intrinsic value (fair price) of ABC stock? What is ABC's dividend yield? A different analyst think..

  Minus cost of goods sold and operating expenses

On the income statement, sales revenue, minus cost of goods sold and operating expenses, equals which of the following?

  Considering undertaking a land improvement practice

You are considering undertaking a land improvement practice that will cost you $120 per acre to establish and an additional $8 per acre to maintain over the next 10 years. Assuming a real discount rate of 4%, what is the present value of the total co..

  Private cemetery business is looking up

The Xdiagnose Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” The project requires an initial investment of $2.4 million. If Xdiagnose requires a 13 percent return on such undert..

  Misrepresents themselves either deliberately

Discuss what you think the ramifications should be if an insurer, or an individual or business, misrepresents themselves either deliberately or by mistake. Give an examples, fact or fiction.

  Disadvantages of issuing stock or long-term debt

As previously discussed, a company needing additional capital can either borrow it, or convince stockholders to invest more. (There is also the third option of using money already accumulated, but this possibility sort of voids the premise of "a comp..

  Financial statements and financial reports

Financial statements and financial reports are your friend. From a company's annual report (10-K), which is the most important type of statement? Why? Optional: Depreciation is how a business uses its assets. Which depreciation method would you recom..

  Dividends are anticipated to maintain a growth rate

Use BAII Plus Calculator and show calculator entry for the following: The next dividend payment by ZYX, Inc. will be $1.99 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever. If ZYX stock currently sells for $31..

  Bond issuer the option to redeem the bond

An agreement giving the bond issuer the option to redeem the bond at a specified price prior to maturity is the                 provision.

  First payment to provide the perpetuity payments

A perpetuity is to pay $500 on the first of each month from January through September, inclusive. No payments will be made in October, November, or December. This pattern of payments is to continue forever. Assuming the monthly effective interest rat..

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