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Haskell Corp. is comparing two different capital structures. Plan I would result in 14,000 shares of stock and $95,000 in debt. Plan II would result in 8,000 shares of stock and $190,000 in debt. The interest rate on the debt is 9 percent. a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT will be $80,000. The all-equity plan would result in 20,000 shares of stock outstanding. What is the EPS for each of these plans? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Plan II $ All equity $ b. In part (a), what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Plan II and all-equity $ c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II? (Do not round intermediate calculations.) EBIT $ d-1 Assuming that the corporate tax rate is 40 percent, what is the EPS of the firm? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) EPS Plan I $ Plan II $ All equity $ d-2 Assuming that the corporate tax rate is 40 percent, what are the break-even levels of EBIT for each plan as compared to that for an all-equity plan? (Do not round intermediate calculations.) EBIT Plan I and all-equity $ Plan II and all-equity $ d-3 Assuming that the corporate tax rate is 40 percent, when will EPS be identical for Plans I and II? (Do not round intermediate calculations.) EBIT $
Wall Mart has decided to buy a chain store in South Africa and now has an exposure to the South African Rand. How should it hedge its short term and long term foreign exchange exposures related to this transaction
Chuck Brown will receive from his investment cash flows of $3,175, $3,460, and $3,850 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at th..
A 20-year bond of a firm in severe financial distress has a coupon rate of 13% and sells for $945. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the..
Calculate the maximum price that you would pay for a ‘constant growth’ stock that has the following characteristics: (a) Dividend: $1.50 (will pay), (b) Growth Rate: 5%, and (c) Required Rate of Return: 10%. Calculate the required rate of return on t..
If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the ..
An investment offers a 15.5 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 6.5 percent. What does Bill believe the inflation rate will be over the next year?
James is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what hopes will be bargian prices. Based on these potential outcomes, what is your estimate of the exp..
What are the values of the output and the interest rate in 1999 when the money supply is 900? Sketch the AD curve and show what happens when the money supply is decreased below 900 in 1998.
David Co. produces all-terrain vehicles (ATVs). The once successful line is no longer selling well, so the company is considering production of a new improved 4 passenger ATV. This can be done by buying needed production equipment. The after tax cash..
Complete a thorough review on the topics of the business of sports and globalization efforts of professional sports leagues. Organize your two-to-three page paper according to appropriate APA style including a title page and reference page.
Fred and Sarajane exchanged equipment in a qualifying-like-kind exchange, Fred gives up equipment with an adjusted basis of $14,000 ( fair market value of $15,000)in exchange for Sarrajane's equipment with a fair market value of $12,000 plus $3,000 c..
Great Seneca Inc. sells $100 million worth of 29-year to maturity 10.59% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $980 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital ..
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