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Lear, Inc., has $800,000 in current assets, $350,000 of which are considered permanent current assets. In addition, the firm has $600,000 invested in fixed assets.a.Lear wishes to finance all fixed assets and half of its permanent current assets with long-term financing costing 10 percent. Short-term financing currently costs 5 percent. Lear’s earnings before interest and taxes are $200,000. Determine Lear’s earnings after taxes under this financing plan. The tax rate is 30 percent.b.As an alternative, Lear might wish to finance all fixed assets and permanent current assets plus half of its temporary current assets with long-term financing. The same interest rates apply as in part a. Earnings before interest and taxes will be $200,000. What will be Lear’s earnings after taxes? The tax rate is 30 percent.c.What are some of the risks and cost considerations associated with each of these alternative financing strategies?
Triangle Enterprises has no debt but can borrow at 9 percent. The firm's WACC is currently 14.7 percent, and there is no corporate tax. If the firm converts to 70 percent debt, what will its cost of equity be?
Maloney Manufacturing Corporation obtains a one-year loan of 2,000,000 Sudanese dinar at an interest rate of 6 percent. At the time the loan is extended, the spot rate of the dinar is $.005
The firm has a pre-tax cost of debt of 8.6 percent and a cost of equity of 13.7 percent. The debt-equity ratio is .0.65 and the tax rate is 35 percent. What is the net present value of the project?
in january 2012 teresa leal was named treasurer of casa de diseno. she decided that she could best orient herself by
If you can negotiate a nominal annual interest rate of 8 percent and you wish to pay for the car over a 5-year period, what are your monthly car payments? How much is your interest payment in the second month?
Texas Wildcatters Inc. (TWI) is in the business of finding and developing oil properties, then selling the successful ones to major oil companies.
Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%. What is the expected return on the market portfolio? What would be the expected return on a zero-beta stock?
If Mr. Flint's opportunity cost (potential return ) is 10 percent, what is the present value of his consulting contract?
Short Description on Credit risk analysis of the different bonds and explain why you would pay more or less for their bonds
One, two and three year maturity, default-free, zero-coupon bonds have yields-to-maturity of 7%, 8% and 9% respectively. What is the implied one-year forward rate, one year from today?
Compute the value of shareholders’ equity account for this firm? How much is net working capital?
What is bootstrap financing it? Why don't all firms use bootstrap financing? Are there any dangers with this approach?
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