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Telfony Inc. expects an EBIT of $4,000,000 for the current year. The firm's capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The cost of equity is 16%, and the company pays a 10% rate on its $10,000,000 of long-term debt. 1,000,000 shares of common stock are outstanding. For the next year, the firm expects to fund one large positive NPV project costing $2,000,000 and it will fund this project in accordance with its target capital Structure.
A) If the firm follows a residual distrivutuion policy (with all distributions in the form of dividends) and has no other projects, what is its expected dividend payout ratio and the dividend paid out per share?
B) Comparer and contrast tax-preference, bird-in-hand, and clinetele effect theoriesof dividend policy.
The market price of a share of common stock at the time of issuance was $19.50, while the market price of a preferred share of stock at the time of issuance was $32. The company paid $12.50 for its treasury stock. Fill in the missing stockholders' eq..
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Calculate the price of the following bonds, where F is the face value, c is the coupon rate, N is the number of years to maturity, and i is the interest rate (or discount rate, or yield).
Vernon-Nelson Chemicals is planning to release a new brand of insecticide, Bee-Safe, that will kill many insect pests but not harm useful pollinators. Buying new equipment to manufacture the product will cost $20 million. what are the incremental ear..
Cable Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semi annual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,120. What is th..
A company produces a single product. Variable production costs are $13.6 per unit and variable selling and administrative expenses are $4.6 per unit. Fixed manufacturing overhead totals $52,000 and fixed selling and administration expenses total $56,..
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