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1. Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. (To ease the calculation, assume no income tax.)a. What is the operating income (EBIT) for both firms?b. What are the earnings after interest?c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part bd. Why are the percentage changes different?
Should the project be accepted and what method did you base your judgment?
Floatation cost for debt is 4% and 8% for equity. What is the project's NPV before and after adjusting for floatation cost?
The employee explains that with this policy the company will never show a loss on its real estate investment activities. Do you agree with the employee ? Why, or why not?
If you decided to go IPO with your company, what variables would you consider in setting the price of the offering? Would you consider the success of other firms that have recently gone IPO in order to set a price that seems marketable?
Find the payback period. Explain what this means in your own words without quoting the definition of payback period. In addition, state whether or not this is considered to be an acceptable payback period.
Assuming all payments, except the first $2 million are paid at the end of each year and the discount rate is 9% what kind of deal did the soccer player snag?
The earnings for Crystal Cargo Corporation have been predicted for the next 5 years and are as follows. There is 1 million shares outstanding.
case study 1nbspyou work in walt disney companys corporate finance and treasury department and have just been assigned
Evaluate cost of equity, cost of retained earnings based on discounted cash flow, C A P M and Bond cost plus premium methods.
Which of the following statements correctly apply to a merger?
Silas 4-Wheeler, Inc. has an ROE of 18 percent, equity multiplier of 2, and a profit margin of 18.75 percent.
2. You purchase a bond for $875. It pays $80 a year (that is, the semiannual coupon is 4%), and the bond matures after 10 years. What is the yield to maturity?
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