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Middlefield Motors is evaluating project A, which would require the purchase of a piece of equipment for 382,000 dollars. During year 1, project A is expected to have relevant revenue of 193,000 dollars, relevant costs of 66,000 dollars, and some depreciation. Middlefield Motors would need to borrow 382,000 dollars for the equipment and would need to make an interest payment of 22,920 dollars to the bank in year 1. Relevant net income for project A in year 1 is expected to be 28,000 dollars and operating cash flows for project A in year 1 are expected to be 123,000 dollars. Straight-line depreciation would be used. What is the tax rate expected to be in year 1? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
Mitchell Industries had the following operating results for 2014: sales = $29,800; cost of goods sold = $19,960; depreciation expense = $5,420; interest expense = $2,790; dividends paid = $1,650. At the beginning of the year, net fixed assets were $1..
One position expressed in the financial literature is that firms set their dividends as a residual after using income to support new investments. A. Explain what a residual policy implies (assuming that all distributions are in the form of dividends)..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.71 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. What is the maximum initial cost the co..
Val's Volleyball Supply's market-to-book ratio is currently 3.36 times and PE ratio is 5.56 times. If Val's Volleyball Supply's common stock is currently selling at $10.05 per share, what is the book value per share and earnings per share?
Gillian Stationery Corporation needs to raise $600000 to improve its manufacturing plant. It has decided to issue a $1000 par value bond with an annual coupon rate of 8.0 percent with interest paid semiannually and a 10 year maturity. Investors requi..
How many months will it take to pay off the debt if you only make the $200 minimum payment each month? All is not lost, because you just received an offer to transfer your $10,000 balance from your current credit card to a new credit card charging a ..
Messman Manufacturing will issue common stock to the public for $25. The expected dividend and growth in dividends are $3.25 per share and 3%, respectively. If the flotation cost is 16% of the issue's gross proceeds, what is the cost of external equi..
Stock X has an average realized return of 24.8% and stock Z has an average realized return of -3.1%. The variances for stock X and stock Z are 0.125447467 and 0.032239975 respectively. Covariance is 0.045469287. The variance on a portfolio that is ma..
TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,100,000 and there are 150,000 shares outstanding. If the benchmark price-sales ratio for the company is 4.7, how much will you pay for the stock?
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.30 for each of the 15 million shares sold. The initial offering price was $21.00 per share, and the stock rose to $23.40 per share in the first few minutes of t..
Amarillo Parts is considering purchasing a small firm in the same line of business. The purchase would be financed by either the sale of common stock or by a bond issue. What is the degree of financial leverage for each plan at $7,000,000 of EBIT? Wh..
5 years ago a firm issued $50 million of 30 year bonds with a coupon rate of 6.5%. These bonds are currently priced at a discount. What can you tell me about the current yield to maturity (effective rate)?
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