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A firm has expected before-tax earnings of $20 per year forever, starting next year. The firm is in the 25% tax bracket.
(a) If the firm is financed with half debt (risk-free, at 5% per year) and half equity (at 10% per year), and this is eternally maintained, then what is its NPV?
(b) If this firm took on $50 in debt and maintained its debt load at $50 forever (i.e., not the 50/50 debt/equity ratio), then what would this firm's value be?
Considering the U.S. Federal Reserve board announced that U.S. Interest rates will stay low through mid-2014 , analyze how this will affect the foreign exchange derivatives
For the Tax Year 2015, George has the following expenses that he wants to include as itemized deductions for the year. His adjusted gross income is $72,000. Using information provided Form 1040 Schedule A, what is the total itemized deduction he can ..
Next year, Jensen’s will pay an annual dividend of $2.75 per share. The company has been reducing the dividends by 10 percent annually. How much are you willing to pay today to purchase stock in this company if your required rate of return is 11.5 pe..
Do investors in high tax brackets or those in low tax brackets benefit more from tax-exempt securities? Why? At a given point in time, which offers a higher before-tax yield: municipal bonds or corporate bonds? Why? Which has the higher after-tax yie..
Treasury bonds paying an 7.00% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually?
What are the expected returns of each of the four individual assets using CAPM if the line equations is plotted with an intercept of 3.0% (risk-free rate) and a market premium of 10.5% (slope of the line)? What is the expected return of stock G, H,..
Consider the CAPM. The expected return on the market is 13%. The expected return on a stock with a beta of 1.5 is 18%. What is the risk-free rate?
Black water Corp just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 25 years and a yield to maturity of 8.29%, compounded semi-annually. What is the current price of the bond?
A bond with 20 detachable warrants has just been offered for sale at $1,000. The bond matures in 25 years and has an annual coupon of $48. Each warrant gives the owner the right to purchase two shares of stock in the company at $45 per share. Ordinar..
Consider an investment of $500,000 at time zero for machinery and equipment to be depreciated using 8 year straight line depreciation starting in year 1 to year 8. Salvage value of the machinery and equipment is expected to be zero. The minimum DCFRO..
After watching a movie about a young woman who quit a successful corporate career to start her own baby food company, Julia Day decided that she wanted to do the same. Sue Pansky, a retired elementary school teacher, is considering investing in Start..
Note the following information on two mutually exclusive projects under consideration by Monroe Food Markets, Inc. Project A-Cash flows Year 0 $-30,000 1 $10,000 2 $10,000 3 $10,000 4 $10,000 5 $10,000 Project B-Cash flows Year 0 $-60,000 1 $20,000 2..
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