Sinking fund and preferred dividends-out of current income

Assignment Help Financial Management
Reference no: EM13925371

Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Goiânia also has 200,000 shares of preferred stock, which pays annual dividend of $5.25 per share. The tax rate of Goiânia is 35%. Calculate the probability that Goiânia will not be able to pay interest, sinking fund, and preferred dividends, out of its current income, next year. Show solutions.

Reference no: EM13925371

Questions Cloud

Debt-to-assets ratio-accomplish the financial restructuring : Recife Inc. has debt-to-assets ratio of 35%, tax rate of 40%, and total value of $200 million. William J. Recife, the CFO, would like to increase the leverage ratio to 39%, and he believes that there will be no change in the bankruptcy cost of the co..
What is palindromic function : Use a direct method to prove that for any string x, xxR is palindromic.
Debt-to-equity ratio and income tax rate : For Florianópolis Corporation debt-to-equity ratio, income tax rate, and dividend payout ratio are all 30%. The cost of debt is 11%. Florianópolis has 2 million shares of common stock, and $27 million in long-term bonds. Its dividend is $1.20 per sha..
Suppliers of component parts : The President of EEC recently called a meeting to announce that one of the firm's largest suppliers of component parts has approached EEC about a possible purchase of the supplier. The President has requested that you and your staff analyse the fe..
Sinking fund and preferred dividends-out of current income : Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Calcula..
How much value can you add : You forecast 14 percent benchmark volatility, the recent average, but unfortunately benchmark volatility turns out to be 17 percent. How much value can you add, given this misestimation of benchmark volatility?
Financially accountable for their operations : According to GASB Statement No. 44, all of the following is a recommendation category for the CAFR's statistical section EXCEPT
Describe the current organizational structure : Structure and Organization: Describe the current organizational structure and background information. How does the organization organize its internal and external communication? What is the age of the organization? What is the organizational struc..
Period cost : Identify each cost as either a product or a period cost

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the value of the firms equity

The MoMi Corporation’s income before interest, depreciation and taxes, was $1.6 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 16% of pre..

  What is the current share price

Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $21, $15, $5.8 and $3. Afterwards, the company pledges to maintain a constant 3 percent growth rate in dividends forever. If the required return on the sto..

  Time line-calculate the yield to maturity

A four-year bond has an 8% coupon rate and a face value of $1000. If the current price of the bond is $870.51, calculate (YTM) the yield to maturity (assume annual interest payments)

  What is effective interest rate being paid

A friend purchased a new sound system that was selling for $4,200. He agreed to make a down payment of $1,000 and to make 24 monthly payments of $160, beginning one month from the time of purchase. What is the effective interest rate being paid?

  Sustainable development and the environment

"Sustainable Development and the Environment". Please respond to the following topic: You have been appointed as the new environmental manager for Microsoft. In a blog post to your key stakeholders, discuss using environmental management as a competi..

  Differences in personal property-real-intangible property

What are the similarities and differences between personal property, real property, intangible property, and natural resources? Provide one example of each. Describe the cost recovery method used for each type of asset. The Modified Accelerated Cost ..

  The bonds makes no interest payments

Which of the following bonds makes no interest payments?

  What is the expected return of your investment

Suppose that the current price of eBay is $40 per share.  You buy 500 shares, using $10,000 of your own money and borrowing the remainder of the purchase price from your broker. The interest rate on the margin loan is 2% per month, and the maintenanc..

  What is allisons cost of new outside equity capital

Allison Engines Corporation has established a target capital structure of 40% debt and 60% common equity. The current market price of the firm's stock is P0 = $36; its last dividend was D0 = $2.80, and its expected dividend growth rate is 8%. What is..

  Security beta expected return-what is the risk-free rate

Suppose you observe the following situation: Security Beta Expected Return Peat Co. 1.20 11.2 Re-Peat Co. 1.00 9.6 Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? What is the risk-free rate?

  Newly formed retirement fund

Suppose that you are the manager of a newly formed retirement fund. You are to set up a series of semiannual payments to accumulate a sum of $1,000,000 in ten years. What is the required semiannual payment, to the nearest dollar? Suppose that immedia..

  About the yield to maturity on bond and the bond price

Which of the following statements is true about the Yield to Maturity (YTM) on a bond and the bond price?

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