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Haskell Corp. is comparing two different capital structures. Plan I would result in 14,000 shares of stock and $95,000 in debt. Plan II would result in 8,000 shares of stock and $190,000 in debt. The interest rate on the debt is 9 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 20,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Plan II $ All equity $ b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Plan II and all-equity $ c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) EBIT $ d-1 Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Plan II $ All equity $ d-2 Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Plan II and all-equity $ d-3 Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II? (Do not round intermediate calculations.) EBIT $
If project B has the cash flow timeline as: Year 0 $-100, Year 1 $75, Year 2 $100, Year 3 $300, Year 4 $75, Year 5 $200. Compute the NPV if the cost of capital is 11%.
Compute the internal rate of return on both projects. Compute the profitability index of both projects. Compute the payback period on both projects.
Romboski, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 60,000 −$ 60,000 1 36,000 23,000 2 30,000 27,000 3 21,000 32,000 4 14,000 25,000. What is the IRR for each of these projects?
Berth Cargo Corporation is considering going public. Managers want to estimate common stock value. The firm’s weighted average cost of capital is 11%, and it has $1.5 million of debt at market value, and $400,000 of preferred stock also at market val..
Exim Inc. reported a return on capital of 12% on its existing assets and a reinvestment rate of 60% in the most recent year. It expects to improve its return on capital to 15% next year on both its existing and new investments, while maintaining its ..
What is the beta of an asset with an expected return of 16%, if the risk-free rate of interest is 6% and the expected market portfolio risk premium is 6%? Accurate to two decimal places.
Silver coin corp.'s preferred stock is currently selling for $67. The company pays $8 annual dividends on this preferred stock. Which rate of return does the investor expect to receive on this stock if the stock is purchased today?
The risk-free rate of return is 5.6 percent and the market risk premium is 13 percent. What is the expected rate of return on a stock with a beta of 1.7?
John has some extra cash today in the amount of $240 and places the money in the bank for 9 years. John expects to have extra cash one-year from today in the amount of $590, and will leave this second amount in the bank for 8 years. All savings earn ..
The process of calculating the present value of a future cash flow is called:
Shark Corporation's target capital structure is 30% debt, 15% preferred, and 55% common equity. The interest rate on new debt is 7%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. ..
Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $78,000 per month plus $0.80 per meal..
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