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Kolby Corp. is comparing two different capital structures. Plan I would result in 900 shares of stock and $65,700 in debt. Plan II would result in 1,900 shares of stock and $29,200 in debt. The interest rate on the debt is 10 percent. Assume that EBIT will be $8,500. An all-equity plan would result in 2,700 shares of stock outstanding. Ignore taxes.
What is the price per share of equity under Plan I? Plan II? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Phase I $ per share
Phase II $ per share
Pullman Corp issued 10-year bonds four years ago with a coupon rate of 10.34 percent. At the time of issue, the bonds sold at par. Today bonds of similar risk and maturity must pay an annual coupon of 5.56 percent to sell at par value. Assuming semia..
Haidong, a Taiwanese contract manufacturer, has experienced an upsurge in business. High- cost Japanese electronics firms have been outsourcing manufacturing lately, and Haidong has landed some big contracts in recent months. Calculate the effective ..
Corporations have both accounting exposure and economic exposure to exchange rate risk. What is the difference between these two? Which types of exposure would be most significant, and why?
Suppose that LilyMac Photography expects EBIT to be approximately $66,000 per year for the foreseeable future, and that it has 300 10-year, 4 percent annual coupon bonds outstanding. (Use Table 11.1) What would the appropriate tax rate be for use in ..
Which of the following is NOT one of the simplifying assumptions made for the three main methods of capital budgeting?
JJ Industries will pay a regular dividend of $0.75 per share for each of the next four years. At the end of four years, the company will also pay out a liquidating dividend. If the discount rate is 12 percent, and the current share price is $75, what..
The "difference" in the buy term and invest the difference strategy is the difference in ______________ between term life insurance and whole life insurance. The primary reason life insurance policies have a savings element is to allow the
Break-even and target profits; volume defined in sales dollars. The manager of Hsu’s Carryout Express estimates operating costs for the year will total $230,000 for fixed costs.
Describe the income tax advantages of making charitable gifts during a person's lifetime, including items that would qualify for income tax deduction. Give some examples.
Harley Motors has $25 million in assets, which were financed with $10 million of debt and $15 million of equity. Harley's tax rate is 40%. If Harley's unlevered beta is 0.8, what is Harley's current (levered) beta? Show your work.
If the before tax RD equals 8% and the firms’ tax rate equals 25%, how much is the Rre using the Bond-Yield-plus-Risk-Premium method?
A large induced-draft fan is needed for and upgraded industrial process. The motor to drive this fan is rated at 100 horsepower, and the motor will operate at full load for 8760 hours per year. The motor's efficiency is 92%. Because the motor is fair..
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