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We want to determine cost of equity for Firm A. We know that Firm A's target debt-to-equity ratio is 1.50. We also know that there is a comparable firm which has exactly same lines of business and therefore is expected to have the same level of business risk as Frim A. The equity beta of the comparable firm is known to be 1.80.
The market value of equity and the market value of debt of the comparable firm are $400 million and $200 million, respectively. The corporate tax rate is 20%. Based on the information given, answer following questions.
(a) What would be your estimate of equity beta for Frim A?
(b) If you find that equity beta is different between Frim A and its comparable firm in (a), how would you explain the difference? If you expect no difference explain why they are not different.
How much would such approach cost or benefit government in form of increased government tax revenues or increased government costs?
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Consider a firm with 80 shareholders, including yourself, who each owns 1 share worth $10. In addition, How would this change the value of the share?
If a company attempts to maximize its fundamental stock price, is this good or bad for society. I have a text that describe that it can be good for society,
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The new CFO wants to employ enough debt to raise the debt/assets ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?
Risk as well as return of a stock involves calculation of expected return, standard deviation and variation
Swenser Corporation arranged a two-year, $1,000,000 loan to fund the foreign project. The loan is denominated in Mexican Pesos, carries 10% nominal rate, and requires equal semi-annual payments. The exchange rate at the time of loan was 5.75 pesos..
Last year Productions pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $0.40 a share for two years commencing four years from today.
The following information are taken from the financial statements of Prone, Inc. as of the end of the year 2007. The information are in alphabetical order.
Assume that National Waferonics has before it a proposal for a 4 year financial lease. The company constructs a table. The bottom line of its table shows the lease cash flows:
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