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Quigley Inc. is considering two financial plans for the coming year. Management expects sales to be $301,770, operating costs to be $266,545, assets to be $200,000, and its tax rate to be 35%. Under Plan A it would use 25% debt and 75% common equity. The interest rate on the debt would be 8.8%, but the TIE ratio would have to be kept at 4.00 or more. Under Plan B the maximum debt that met the TIE constraint would be employed. Assuming that sales, operating costs, assets, the interest rate, and the tax rate would all remain constant, by how much would the ROE change in response to the change in the capital structure?
a. 3.83% b. 4.02% c. 4.22% d. 4.43% e. 4.65%
Most employees choose to eat their lunch in the cafeteria. Is there an agency cost here and if so, how can management eliminate or reduce this agency cost?
Billings, Inc has net income of $161,000, a profit margin o 7.6 percent, and an accounts receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the days' sales in receivables?
Calculate the following for both bonds using semiannual analysis.
If I want to accumulate $15,000 in 6 years by making equal end-of-year deposits into an account paying 7% interest, how large should those deposits be?
The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 8.4%. What is the maturity risk premium for the 2-year security?
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A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.
How high does the stock price have to rise in 3 months for the option strategy to be more profitable than the stock strategy? In other words, at what stock price, will the 2 strategies result in the same profit?
The Wall Street Journal reports that the rate on two year Treasury securities is 2.10% and the rate on four year Treasury securities is 3.05%.
Discuss the agency transaction (brokerage) and the principle transaction (dealer) that is involved in trading. What determines profits in each activity?
Nummer electric Corporation can make a product in-house or outsource it. The fixed cost to produce it in-house is $72,000 abd each item costs $420 to produce.
Computation of yield to maturity at a current market price of bond and Would you pay $829 for each bond if you thought that a "fair" market interest rate for such bonds was 12%- that is if r=12%
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