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Abe Forrester and three of his friends from college have interested a group of venture capitalist in backing their business idea. The proposed operation would consist of series of retail outlets to distribute and service a full line of vacuum cleaners and accessories. These stores would be locate Dallas Houston and San Antonio To finance the new venture two plans have been proposed
Plan A is an all-common-equity structure in which 2.5 million dollars would be raised by selling 82,000 common stock Plan B would involve issuing 1.3 Million dollars in long term bonds with an a effective interest rate of 11.8% plus $1.2 million would be raised by selling 41,000 share of common stock. The debt funds raised under plan B have no fixed maturity date, in that this amount of finance leverage is considered a permanent part of the firms capital structure ABE and his partners plan to use 40% tax rate in their analysis and they have hired you on a consulting basis to do the following
A. Find the EBIT indifference level associated with the two financing plans.
B. Prepare a pro forma income statement for the EBIT level solved for in Part a. that shows that EPS will be the same regardless whether Plan A or Plan B is chosen
The following account balances were taken from the records of Brooks Company on December 31, 1989. Each account has a normal balance.
a new project would require and immediate increase in raw materials in the amount 12000. the firm expects that accounts
archer daniels midland company is considering buying a new farm that it plans to operate for 10 years. the farm will
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Carter's preferred stock pays a dividend of $1.00 per quarter. If the value of the stock is $57.50, determine its nominal annual rate of return?
Write down the name of some opportunities and threats associated with going public through an IPO.
sosa corporation issued bonds with a face value of 400000 and a contractual rate of interest of 6 at 99 on july 1. the
In November of 1998 you bought 100 shares of Microsoft stock for $35.375 a share. In November of 2000, hearing about an unfavorable ruling against Microsft by a federal judge,
Outfitting the space for a coffee shop would require a capital expenditure of $35,000 plus an initial investment of $5,000 in inventory. What is the correct initial cash flow for your analysist of the coffee shop opportunity?
If the assumed tax rate is 40 percent on ordinary income and capital gains, explain what is the initial investment
A 5-year corporate bond has the same defult risk premium ans liquidity premium as the 10-year corporate bond described. What is the yield on this 5-year corporate bond?
Calculation of Project OCF and Project NPV and Project Cash Flow from Assets and Modified ACRS. and What is the project's year 0 net cash flow
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