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Alpha company is looking at two different capital structures, one an all-equity firm and the other a leverages firm with $2 million of debt financing at 8% interest. The all-equity firm will have a value of $4 million and 400,000 shares outstanding. The leveraged firm will have 200,000 shares outstanding.
a. Find the break even EBIT for Alpha company using EPS if there are no corporate taxes.b. Find the break even EBIT for Alpha company using EPS if the corporate tax rate is 30%c. What do you notice about these two break-even EBITs for Alpha company?
Business value of social networks
Given the following two mutually exclusive Investments A and B, compute the crossover point.
A company is planning an expansion. The initial investment is $480,000 and anticipates cash inflows as listed below. The cost of capital is 12.2%. What is the profitability index and should the firm go ahead with the project?
How much would such approach cost or benefit government in form of increased government tax revenues or increased government costs?
Upstate Water Company just sold a bond with 80 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. Currently, the yield on similar straight bonds is 15%. What is the imp..
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Describe why corporations engage in swap-driven financing, and describe the defining features of an interest rate and currency swap. Why may a corporation prefer one kind of swap contract over another?
Find the present value of cash flow stream if the interest rate is 6 percent. The only capital investment needed for a small project is investment in inventory.
What is the effect on NPV of an addition of $750,000 in Net Working Capital?
Chester Corp. is downsizing the size of their workforce by 10% (to the nearest person) next year from various strategic initiatives. How much will the company pay in separation costs if each worker receives $5,000 when separated?
You estimate that the little drive-through coffee kiosk you own will generate ordinary annuity after-tax cash flows of $150,000 per year for the next ten years. If you discount these cash flows at an annual rate of 14%, what is the present value o..
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