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The second half of Chapter 12 discusses the use of debt financing in capital structure. The book refers to this practice as leverage, because the use of debt magnifies the the EPS (earnings per share) that results from any level of EBIT (earnings before interest expense and taxes), both in the positive direction as well as in the negative direction. We know that some industries, such as utilities that provide us with electricity and natural gas, insurance companies, and supermarket chains all have consistently higher levels of debt in their capital structure (leverage) than the average US company. We also know that by comparison, corporations in Europe and Japan have a higher proportion of debt in their capital structure than their US counterparts.
Discuss reasons why these types of companies have capital structure policies that call for relatively high levels of debt in their capital structures. Also describe reasons that would cause their managements to alter the mix of debt and equity in the capital structure, in response to managerial, market, and general economic conditions.
1. a what is the effective annual cost to the borrower of a 500000 4 20-year fullyamortized home loan repaid annually
a project has a forecast cash flow of $128 in 1 year and $139 in year 2. The interest rate is 7%, the estimated risk premium on the market is 12.00% and the project has a beta of .68.
calculate the after cost of debt capital for the followingtrw creditors require a before tax cost of debt of 7.8
What is the purpuse of technical analysis, and why are those who use technical analysis referred to as chartists?
The firm does not pay any dividends. Sales are expected to increase by 3.5 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?
Moe & Chris' Delicious Burgers, Inc., sells food to Military Cafeterias for $15 a box. The fixed costs of this operation are $80,000, while the variable cost per box is $10.
1.why are investors risk-averse? how can investors deal with different degrees of risk?2.what is the expected return on
The total annual payments will be level at $3,300 until a final smaller annual payment suffices to pay off the loan. Find the amount of the final sinking fund deposit.
a stock is bought for $22.00 and sold for $26.00 one year later, immediately after it has a paid a dividend of $1.50. What is the capital gain rate for this transaction?
picture this you and a few friends have just graduated from charles sturt university and see in the newspaper the
a new machine will cost 65000 today and generate after-tax cash inflows of 156000 for six years. find the npv if the
The Yeptal Corporation's last dividend was $2.00. The dividend growth rate is expected to be constant at 25% for 3 years, after which dividends are expected to grow at a rate of 7% forever. Yeptal 's required return (rs) is 11%. What is Yeptal 's ..
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