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Question: You are the new CFO of Megasoft. Megasoft has $ 1billion market value. It currently has no debt. Corporate tax rate is 40%. You make a compelling argument to the board that debt will enhance shareholder value.The board authorizes you to issue risk-free debt and buyback some stock using ALL the proceeds of debt. The board wants the post-leverage capital structure to have exactly 20% debt (B/VL=0.2). You will soon make an announcement to the shareholders about your plans to issue debt and buyback some stock.
(a.) How much debt will you need? (Be careful. As soon as the announcement is made, the stock will go up to reflect the benefits of debt. VL=VU+TB. You need enough B to buy back 20% of VL.)?
Which of the following options is most profitable?
Last year Montero Corporation had $850 million of sales, and it had $425 million of fixed assets that were used at only 60% of capacity. What is the maximum sales growth rate the company could achieve before it had to increase its fixed assets?
Discuss the random walk hypothesis? Does research evidence tend to support or deny the validity of this hypothesis?
If the mortgage requires monthly payments over a term of 20 years, with each payment made at the end of the period, what is the required monthly payment?
The Omega Company has some excess cash that it would like to invest in marketable securities for a long-term hold. Its vice-president of finance is planning three investments
What are its interest payments, taxable income, tax payments, and income left for shareholders in a no-inflation environment?
If the total debt-to-equity ratio of a firm is 1.0, what is the company's simple capital structure?
As the risk management of a small chain of restaurants, you are analyzing the losses incurred over the last 10 years. Using these data, calculate the Expected value of losses, Variance, Standard Deviation and Coefficient of Variation.
What should be the hedge ratio?
Identify two strategies health managers can implement to reduce cost escalation. Provide supoort for your strategies.
Permanent working capital required at outset, to be restored to cash at the end of the project's life $ 50,000.
What would be the effective cost of that credit? Round your answer to two decimal places.
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