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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 b . d. Why are the percentage changes different?
Suppose the 10-year Treasury yield is 3.5% and the yield on the 10 year treasury Inflation Protected Securities (TIPS) is -1.0%. What can you conclude about the real rate of interest and expected inflation? Please show work, will rate high.
1. in general the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the
the authorized share capital of the alfred cake company is 150000 shares. the equity is currently shown in the
The tax rate is 34 percent. The sale price is estimated at $15.00 a unit, give or take 4 percent.
Compute sustainable rate of growth and the total asset turnover is 1.40 and the equity multiplier is 1.50
Assume that (1) all of the MM assumptions are met, (2) both firms are subject to a 40% federal-plus-state corporate tax rate, (3) EBIT is $2 million and (4) the unlevered cost of equity is 10%
Suppose the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of NZ$ is $.52, and the one year forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $.48. Based on this information, what is the ef..
Objective type questions on stocks and risk analysis and the measure of dispersion of a data set calculated from the square root of the value for variance
what do you think about the dilemma facing mark miller? Does this case present an ethical issue? if so, to which party or parties? if you could act as the ultimate authority in this situation, what would you do?
what are the after-tax proceeds from the sale, assuming the marginal tax rate is 35 percent.
heavy metal corp. is expected to generate the following free cash flows over the next five yearsyear 1 2 3 4 5fcf
Suppose a U.S. government bond will pay $1,000 four years from now. If the going interest rate on 4-year government bonds is 4.5%, how much is the bond worth today?
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