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Abe Forrester an three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum cleaners and accesories. These stores would be located in dallas, houston and san antonio. To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 82,000 shares of common stock. Plan B would involve issueing $1.2 million dollars in long term bonds with an effective interest rate of 12.3% plus $1.1 million would be raised by selling 41,000 shares of common stock. The debt funds raised under Abe and his partners plan to use a 35% tax rate in their analysis, and they have hired you on a consulting basis to do the following. a. Find the EBIT indifference level associated with the two financing plans. b. Prepare a pro forma income statement for the EBIT level solved for part a. that shows the EPS will be the same regardless whether PLAN A B is chosen. Find the EBIT indifference level associated with the two financing plans. The EBIT indifference level associated with the twp financing plans is $
In November of 1998 you bought 100 shares of Microsoft stock for $35.375 a share. In November of 2000, hearing about an unfavorable ruling against Microsft by a federal judge,
A firm is reviewing a project that has an initial cost of $71,000. The project will produce annual cash inflows, starting with year 1, of $8,000, $13,400, $18,600, $33,100, and finally in year 5, $37,900. What is the profitability index if the dis..
According to the Miller and Modigliani model dividened policy is irrelevant. However, there are numerous factors in the real world that violate the MM assumptions.
Interest First City Bank pays 6% simple interest on its savings account balances, whereas Second City Bank pays 6% interest compounded annually. If you made a $5,000 deposit in each bank, how much more money would you earn from your Second City Bank ..
Computation of payroll accounting with taxes and Compute the missing amounts in the chart provided
Mention the factors which affect currency call option premiums and briefly describe the relationship that exists for each. Do you think an at-the-money call option in euros has a higher or lower premium than an at-the-money call option in British ..
Explain why the cost of debt is typically different than the cost of equity. Give examples and explain your answers.
Discuss on efficient markets hypothesis thus we can simply pick mutual funds at random Is this statement true or false
Pavlovich Instruments, Corporation, a creator of precision telescopes, expects to report pre-tax income of $430,000 this year. The firm's financial manager is planning the timing of a purchase of new computerized lens grinders.
Investment Portfolio Project: Relative Performance Analysis Paper for these five securities: PIMCO Total Return A, Procter & Gamble, United Parcel Service, Citigroup, Lockheed Martin, Walt Disney
Consider a $60 million dollar loan that is amortized over four years with end of year payments of $19.4 million each.
Explain the four time value of money concepts - present value, present value of an annuity, future value, and future value of annuity.
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