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LSI recently issued $195,000 of perpetual 9% debt and used the cash to do a stock repurchase. Earnings for LSI are anticipated to be $83,000 annually before interest and taxes. The company has a dividend payout of 100% of earnings and its unlevered cost of capital is 15%. Corporate taxes for LSI are 40%.a) What is the unlevered value of LSI??b) What is the value of the levered firm using the adjusted PV method?c) What are an investor's expectations for the return on equity for the levered company?d) What is the value of LSI equity using the flow to equity method?
A firm borrowed $1,500,000 from National Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate.
Microtech Corporation is increasing rapidly and currently needs to retain all of its earnings, hence it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1 coming in three years from ..
Suppose the spot exchange rate is $1.43 per British pound and the strike on a dollar denominated pound call is $1.30. Assume r = 0.045, rf = 0.06, ? = 0.15 and the option expires in 180 days. What is the call option price?
Merton Enterprises has bonds on the market making annual payments, with 15 years to maturity, and selling for $971. At this price, the bonds yield 8.3 percent.
Cambridge Prep Shops, a national clothing chain, had sales of $200 million last year. The business has a steady net profit margin of 12% and a dividend payout ratio of 40%.
write down the name of methods which ignores the time value of money.
If Tan Lines faces a flotationcot of 10% on new equity issues. What will be the flotation adjusted cost of equity?
How low would the interest rate on the loan with the compensating balance have to be for you to choose it?
Discuss the taxation of one of the following: S Corp, C Corp, PSC, Sole Proprietor,LLP. Provide an advantage OR disadvantage. How could taxes be lessened?
Randy, age 63, is a participant in the stock bonus plan of XYZ, Inc., Which of the following correctly describes Randy's tax consequences in year 6 from this distribution if Randy does not sell the XYZ stock until year 8?
An investor holds a Treasury bond with a face value of $5000, a coupon rate of 4%, and semiannual payments that matures on 15/01/2012. How much will the investor receive on 15/01/2012?
Suppose if WalMart has a beta of 1.1, current risk-free rate is 3.5%, average risk free rate over the last 70 years is 3.2 percent, and the expected return on the stock market is 12.3 percent,
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