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The following facts appy to your company:
Target capital structure: 50% debt; 50% equity.
EBIT $200 million.
Assets $500 million.
Tax rate: 40%
Cost of new and old debt: 8%.
Based on the residual distribution policy (with all distributions in the form of dividends), the payout ratio is 60 percent. How large (in millions of dollars) will the capital budget be? Show solution step by step.
You have just received notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 70 years from now. The appropriate discount rate is 8 percent. What is the presen..
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 9 years, and a cost of capital of 11%. What is the project's discounted payback period?
Write a summary of the attached Article by Mishkin, Frederic S - Over the Cliff: From the Subprime to the Global Financial Crisis';
Suppose that a trader has bought some illiquid shares. In particular, the trader has 100 shares of A, which are bid $50 and offer $60, and 200 shares of B, which are bid $25 and offer $35. What are the proportional bid–offer spreads?
The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $6,900, they could be sold for $18,200. Alternatively, the keyboards could be sold “as is” for $8,100. What..
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed $580,000 in the common stock account and $3.5 million in the additional paid-in surplus account. The 2015 balance sheet showed $620,000 and $3.9 million in the same two accounts, respect..
Reports should cover some very specific information relating to the general subject matter of the course and to the subject area of the individual class session. Narrative information of the subject being covered (the story). Quantitative information..
What does the yield curve represent? What does the cost of capital represent?
Inmoo Company’s average age of accounts receivable is 38 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 days. Assuming a 365-day year, what is the length of its cash (conversion) cycle?
What is the annual tax shield to a firm that has total assets of $80 million and a net worth of $55 million, if the average interest rate on debt is 8.5% and the marginal tax rate is 35%?
Consider an asset that costs $664,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $178,000. If the relevant tax rate is 35..
Determine the cross exchange rate between the Japanese yen and the Australian dollar. Compare the cross exchange rate with the direct rate. Are there any differences? Evaluate the significance of your results.
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