Firm is considering two different financing plans

Assignment Help Financial Management
Reference no: EM131048603

A firm is considering two different financing plans. Under plan I the interest is $8,000 and there are 1,000 shares of common stock outstanding. Under plan II the interest is $2,000. If the indifference point is $20,000 and the tax rate is 30%, how many shares of common stock are outstanding for plan II?

Reference no: EM131048603

Questions Cloud

Which bond has the greater interest rate risk : Given two comparable bonds A and B with par values of $1000. Both bonds mature in twenty years. Bond A has a coupon rate of 15%. Bond B has a coupon rate of 9%. Which bond has the greater interest rate risk?.
Attempt green-field speculations : While thinking about FDI, why do firms obviously want to obtain existing resources instead of attempt green-field speculations?
Net cash flow per unit for the next five years : Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $305,000 net cash flow per unit for the next five years. Also, a..
Analyse the cash flow statements : HI5001 Accounting for Business Decisions (T1, 2016). Review the statement of cash flows for the most recent year and indicate the following: Net cash inflow (outflow) from operating activities. Analyse the Cash Flow Statements for the last 2 years an..
Firm is considering two different financing plans : A firm is considering two different financing plans. Under plan I the interest is $8,000 and there are 1,000 shares of common stock outstanding. Under plan II the interest is $2,000. If the indifference point is $20,000 and the tax rate is 30%, how m..
Standard format for preparing assignment : All instruction will be considered during checking assignment. So, consider all these. Use the standard format for preparing assignment Give the answer according to question, no mark will be given for irrelevant material.
Receive six coupon payments and redeem it at par value : Emma plans to purchase a $1000, 12 percent semi-annual bond, hold it for 3 years, receive six coupon payments, and redeem it at par value. What is maximum amount she should pay for the bond if she wants to earn at least 14 percent compounded semiannu..
Benefit platinum fitness receives from this arrangement : When Platinum Fitness sells its accounts receivable to a financial institution, it receives less than the full value of the accounts receivable. Which of the following is a benefit Platinum Fitness receives from this arrangement?
Concepts of multiculturalism and diversity : Apply concepts of multiculturalism and diversity to become an agent of change. Kouzes and Posner (2012) state, "Leaders make sure that people know they are being paid attention to and not being taken for granted" (p. 318). There are many different..

Reviews

Write a Review

Financial Management Questions & Answers

  How much can you withdraw each year in your retirement

You are planning your retirement in 10 years. You currently have $160,000 in a bond account and $600,000 in a stock account. You plan to add $8,000 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..

  What is your return rate in one year

Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..

  Calculate the implied dividend yield

Calculate the implied dividend yield and find the price range such that you make money under each of the cases

  Distribution of possible outcomes for projects estimated npv

Love Co. (a SWISS firm) is planning to invest CHF 2.5 million in a project in Denmark that will exist for one year. Its required rate of return on this project is 18%. It expects to receive cash flows of 2 million euros in one year from this project...

  What was the average real risk premium

You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The average inflation rate over this period was 3.33 percent and the average T-b..

  Explain what is the firm''s weighted average cost of capital

Fancee Restaurant's cost of equity is 15.3 percent and its aftertax cost of debt is 6.1 percent. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.58 and the tax rate is 30 percent?

  Retirement account today and expect to earn average return

You are depositing $20,000 in a retirement account today and expect to earn an average return of 6% per year on this money. How much additional income will you earn if you leave the money invested for 25 years instead of just 20 years? (show calculat..

  Shares of new stock

A firm currenlty has 20,000,000 shares with a price of 25 per share. they want to issue another 2,000,000 shares so they give each shareholder the right to buy .1 shares of new stock for 2.00 ( it will take ten rights to buy one new share for 20.0..

  Use licensing agreements to enter world markets

How can a company use licensing agreements to enter world markets? What two fundamental product strategies do companies choose between when selling their products in the global marketplace?

  What is portfolios expected return and standard deviation

Irene Adler is considering investing in the common stock of Holmes and Watson. If she invests 60% of her funds in Holmes and 40% in Watson, and if the correlation of returns between these two securities is 0.45, what is the portfolio’s expected retur..

  What is the after-tax salvage value of the asset

An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $8,900,000 and will be sold for $1,930,000 at the end of the project. Required: If the tax rate is 30 percent..

  Determine the markup as a percentage of the selling price

A manufacturing company has fixed costs of $120,000 per month and variable costs of $6 per unit. Determine the break even quantity for each of these price points. Determine the markup as a percentage of the selling price when the cost is $7 and the s..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd