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Suppose a firm has an EBIT of $1,400,000 and finances its assets with $6,000,000 of debt at 6 percent interest and 300,000 shares of stock selling at $12.50 a share. To lessen the risk associated with this financial leverage, the firm is thinking about reducing its debt by $3,000,000 by selling more stock. The firm is in the 35 percent tax bracket. The change in the capital structure won't have any effect on the firm's operations, thus EBIT will remain at $1,400,000. What's the change in the firm's EPS from this change in capital structure
Explain the relationship between financial decisions and shareholders' wealth. The general level of interest rates shifts upward, causing investors to require a higher rate of return on securities in general.
What is the cost of external common equity?
Southern Dental Care is considering purchasing a smaller dental clinic, named John Dental Practice. Analysts of Southern Dental Care project that the merger will result in incremental net cash flows of $1 million in Year 1, $5 million in Year 2, $10 ..
Hughes Co. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent and the company just paid a divi..
Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A and B. Which of the following would occur if the market risk premium increased by 1% but the risk-free rate remained constant? Cheng Inc. is consider..
Hastings Entertainment has a beta of 0.36. If the market return is expected to be 14 percent and the risk-free rate is 5.25 percent, what is Hastings’ required return? What would be the required return if beta increased to .80?
Suppose your firm receives a $15M order in the last week of the fiscal year. You fill the order with $11.1M of inventory. The customer picks up the product before year end and pays you $9.0M and promises to pay the rest in 60 days time. Your firm’s t..
Which of the following will increase the NPV of switching from check to ACH disbursements? Which of the following refers to the disbursement philosophy that involves the use of present value techniques to determine whether new payment terms are equiv..
Select two different types of HCOs and comment on the most positive and most negative effects of using cash versus accrual accounting method for the business
A 12% coupon rate bond makes semi-annual interest rate payments.
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.56 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. If investors require a 11 percent return on The Jackson-Timberlake War..
Titan Football Manufacturing had the following operating results for 2016: What is the operating cash flow for 2016? What is the cash flow to creditors for 2016? What is the cash flow to stockholders for 2016?
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