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DAR Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 180,000 shares of stock outstanding. Under Plan II, there would be 130,000 shares of stock outstanding and $1.49 million in debt outstanding. The interest rate on the debt is 6 percent and there are no taxes. Use M&M Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $ per share What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and round your answers to the nearest whole dollar amount, e.g., 32.)
equity plan $
Levered plan $
Key facts and assumptions concerning Costco Company, at December 31, 2011, appear below: Yield to maturity on long-term government bonds: 3.28%. Yield to maturity on company long-term bonds: 4.62%. Estimate Costco's cost of equity capital. Estimate C..
If an investment is producing a return that is equal to the required return, the investment's net present value will be:
What is the bonds nominal annual coupon interest rate - What is the liquidity premium (LP) on Niendorf's bonds - what is the present value of the cash flow stream
Swaps provide for more complete financial markets and help borrowers tailor their financing at lower interest rates in markets that might not be accessible to them. However swaps present risks. If you were the swap bank, discuss the 2 risks that you ..
What is meant by the Weighted Average Cost of Capital? Please define it? What is the use of the Weighted Average Cost of Capital?
Racin scooters is introducing a new product and has an expected change in EBIT of $475,000. R.Scooters has a 34% marginal tax rate. With the project: 80,000 Accounts Payable without the project: 70,000; With the project: 94,000 What is the project's ..
A balance sheet balances assets with their sources of debt and equity financing. If a corporation has assets equal to $6,900,000 and a debt ratio of 73%, how much debt does the corporation have on its books?
Provo, Inc., had revenues of $10,000,000, cash operating expenses of $5,000,000, and depreciation and amortization of $1,000,000 during 2015. The firm purchased $500,000 of equipment during the year while increasing its inventory by $300,000 (with no..
Fleet skills test can be accomplished on a driving range or in actual traffic conditions. Give at least one advantage and one disadvantage of each testing environment.
Today, Litchfield Design purchased a piece of equipment for 82,000 dollars that will be depreciated to 14,000 dollars over 17 years using straight-line depreciation. What would the after-tax cash flow be from the equipment sale if the equipment is so..
The expected return on the market portfolio is 21%. The risk-free rate is 12%. The expected return on SDA Corp. common stock is 20%. The beta of SDA Corp. common stock is 1.90. Within the context of the capital asset pricing model, _________.
You estimate the sales price to be $10 per unit and sales volume to be 3,000 units in year 1; 10,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $3 per unit and fixed costs are $25,000 per y..
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