#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
Theoretically Modigliani and Miller (1958) took a fairly straightforward view of the purpose of a company in an economy. They pointed out that companies take cash from providers o

Question 1: (i) How do economists go about studying the economics of the public sector? Describe the four stages of analysis (ii) The level of government intervention dif

Question: a) Write down and describe the Black-Scholes option pricing formula with respect to the various determinants of option prices. b) Determine the price of a European

Question 1: (a) What are the competing theories which have been put forward to explain the term structure of interest rates? Which theories do the evidence tend to support?

Problem: Banks are net lenders, when they have excess funds, or net borrowers, when they have future deficits. As any lender or borrower, they cannot eliminate interest rate r

Problem: (a) The Automated Clearing House (ACH) is an electronic payment network used by individuals, businesses, financial institutions and government organisations. (i) Ou

develop a corporate finance project and dissices all ground of financials areas

Determine current stock price: 1) IBM issued 10-year bonds with a par value of $1,000 and a coupon rate of 10%, paid semiannually. The yield to maturity on this bond is 12%.


problem 1 (a) (i) Define Corporate Governance. (ii) Show the ethical implications behind Corporate Governance. (b) (i) Why do organizations engage in social accounting?