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AQ&Q has EBIT of $2 million, total assets of $10 million, stock holder’s equity of $4 million, and pretax interest expense of 10 percent.a) What is AQ&Q’s indifference level of EBIT?b) Given its current situation, might it benefit from increasing or decreasing its use of debt? Explain.c) Suppose we are to AQ&Q’s average tax rate is 40 percent. How does this affect your answers to (A) and (B)?1.Faulkner’s Fine Fries, Inc. (FFF) is thinking about reducing its debt burden. Given the following capital structure information and an expected EBIT of $50 million next year, should FFF change their capital structure?2.The Nutrex Corporation wants to calculate its weighted average cost of capital. Its target capital structure weights are 40 percent long-term debt and 60 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is in the 40 percent tax bracket. The current risk-free interest rate is 8 percent on Treasury bills. The expected return on the market is 13 percent and the firm’s stock beta is 1.8.a) What is Nutrex ‘s cost of debt?b) Estimate Nutrex’s expected return on common equity using the security market line.c) Calculate the after-tax weight average cost of capital.
1. in work organizations which one of the following nonverbal cues is most likely to be used to convey a sentiment of
Differentiate between direct and indirect methods of intervention. Address the tools used by governments to impact exchange rates and how political factors impact these decisions.
Determine the optimal number of yards of material Sofaworld should order, the minimum total inventory cost, the optimal number of orders per year, and the optimal time between orders.
Garth's Micro Brewery, whose shares are currently trading at $40 per share, is considering acquiring Wayne's Beer Bottling Co. What is the offer value per share and offer premium?
Also, assuming the central bank maintains its existing inflation target, illustrate the impact on the monetary policy reaction function and on equilibrium inflation and output both in the short run and in the long run.
a. Calculate the expected rate of return on investments X and Y using the most recent year’s data. b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why?
Consolidated Industries borrows at prime plus 1.5% on its line of credit. The line requires a 15% compensating balance. If prime rate is 9%, what is the nominal APR of the line of credit?
The market portfolio is assumed to be composed of two securities, Investment X and Investment Y as given below. Determine based on the information given the average return,
In the early 1980's, the prime interest rate hit a high of 21%. In 1995 the prime rate was considerably lower. That sharp interest rate decline has increased the company concerns about the efficiency of their cash management system.
A bond has a face value of $1,000, a market price of $1,112, and pays $45 in interest every six months. What is the coupon rate?
You have estimated the spot rates as follows, r1=5%, r2=5.4%, r3=5.7%, r4=5.9% and r5=6%. Suppose the face value is $1000.
using the proceeds to purchase another stock with a beta of 1.35. What will the portfolio's new beta be after these transactions? Round your answer to two decimal places.
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