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Destin Corp. is comparing two different capital structures. Plan I would result in 10,000 shares of stock and $90,000 in debt. Plan II would result in 7,600 shares of stock and $198,000 in debt. The interest rate on the debt is 10 percent. Assume that EBIT will be $48,000. An all-equity plan would result in 12,000 shares of stock outstanding. Ignore taxes. What is the price per share of equity under Plan I? Plan II? Price per share of equity Plan I $ per share Plan II $ per share
Cindy borrows 13,500 for 12 years at an annual effective interest rate of i. She accumulates the amount necessary to repay the loan by a sinking fund. Cindy makes 12 payments of P at the end of each year, which includes payment on the loan at an annu..
Fixed cost sources of financing include both debt and common stock. Financial risk is the basic risk inherent in the operations of a firm. It can be viewed as the volatility of a firm’s EBIT. What is the cost of capital at Marquez’ optimal capital st..
A company receives an average of 325,000 dollars in payments a day. On average it takes 4 days for the company to receive the checks via the mail. The company wants to establish a lockbox system. Where customers checks would be sent to a local bank i..
Katy's Kitten Emporium (KKE) is a thriving pet store business. You would like to understand the market risk of the KKE and are looking to find its Beta of the Assets. KKE's Beta of Equity is 1.7, the beta of debt is 0.2, and the tax rate is 29%. If K..
Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% of par value.- If investors require a return of 2.25%, then what is the fair price for the preferred shares today?
Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan?
What role, if any, should the United Nations play in regards to China strengthening its security while promoting global peace and security?
Mustaine Corporation stock currently sells for $79 per share. The market requires a return of 9.6 percent on the firm’s stock. If the company maintains a constant 2.8 percent growth rate in dividends, what was the most recent dividend per share paid ..
Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? Suppose your firm immediately uses $130 million of the line and pays it off in one year. What is the effective annual interest rate on this $130 million l..
Distributions from IRA accounts
Alan would like to speculate on a possible rise in stock price of Garmin. The current stock price of Garmin is $42. Alan expects that in one year the stock price of Garmin will be either $48 (up move) or $36 (down move). How many shares of Garmin doe..
In an agreement to exchange dollars for euros in 3 months at a price of $.090 per euro, the price is the: Mutual funds which allow shares to be redeemed at any time at a price that is tied to the asset value of the fund are known as: Investment banks..
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