#title.finance., Corporate Finance

3. Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. What is the value of the firm according to MM with corporate taxes?

a. $475,875

b. $528,750

c. $587,500

d. $646,250

e. $710,875

4. Gomez computer systems has an EBIT of $200,000, a growth rate of 6%, and its tax rate is 40%. In order to support growth, Gomez must reinvest 20% of its EBIT in net operating assets. Gomez has $300,000 in 8% debt outstanding, and a similar company with no debt has a cost of equity of 11%.

According to the MM extension with growth, what is the value of Gomez''s tax shield?

a. $156,385

b. $164,616

c. $173,280

d. $182,400

e. $192,000

5. Trumbull, Inc., has total value (debt plus equity) of $500 million and $200 million face value of 1-year zero coupon debt. The volatility (s) of Trumbull''s total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 and N(d2) = 0.9050.

What is the value (in millions) of Trumbull''s equity if it is viewed as an option?

a. $228.77

b. $254.19

c. $282.43

d. $313.81

e. $345.19
Posted Date: 3/3/2013 12:58:55 PM | Location :







Related Discussions:- #title.finance., Assignment Help, Ask Question on #title.finance., Get Answer, Expert's Help, #title.finance. Discussions

Write discussion on #title.finance.
Your posts are moderated
Related Questions
Based on its Net Present Value (NPV), should the following project be accepted?  Please assume a discount rate of 10%.

#question.Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and

The traditional view of credit risk relates to borrowers, firms, individuals, or financial institutions. Nevertheless, more and more specialized finance transactions deal with str

I have been given 3 different types of projects. They state the IRR and how much the project will add. The question goes on to give a WACC with break points. The question wants

Relationship between the size of companies and the role of M & A

The case company combines SKUs into product groups and product groups into assortment groups. The methods based on advance demand information (Methods 1-3) can therefore be on a pr

a firm wishes to maintain an internal growth rate of 6.5% and the dividend payout ratio of 25%. The current profit margin is 6%, and the firm uses no external financing sources. Wh

how the knowledge of corporate finance helps thea multinational company to take decision about mergers and acquisition

Methodology of an Event Study In this section we outline the methodology of an event study. In suc- ceeding sections we apply the methodology to a number of different cases. A