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You have been asked to estimate the value of General Communications, a telecomm firm. General Communications has a debt to capital ratio of 30%, a beta of 1.10 and a pre-tax cost of debt of 7.5%. The firm had earnings before interest and taxes of $ 600 million in 1998, after depreciation charges of $ 300 million. The firm had capital expenditures of $ 370 million, and non-cash working capital increased by $ 50 million during 1998. The firm also had a book value of capital of $ 2 billion at the beginning of 1998. (The treasury bond rate is 5%, the market risk premium is 6.3% and the firm has a tax rate of 40%). Assuming that the firm is in stable growth, and that the return on capital and reinvestment rates from 1998 can be sustained forever, estimate the value of the firm.
A firm has a WACC of 10% and $50,000,000 in assets. They feel that that they can reduce their WACC to 9% by doing a better job of managing risk. How much should they be willing to pay for risk reduction? The idea that the failure of one firm can caus..
Medwig Corporation has a DSO of 27 days. The company averages $8,750 in credit sales each day. What is the company's average accounts receivable? Round your answer to the nearest dollar.
A company has net income of $265,000, a profit margin of 9.3 percent, and an accounts receivable balance of $145,300. Assuming 80 percent of sales are on credit, what are the company’s days’ sales in receivables?
Clearlake does not know how many euros it will receive in the future, so it would have difficulty even if a long-term hedging method were available. How can Clearlake realistically deal with this dilemma and reduce its exposure over the long term?
Fargo North is considering the purchase of some new equipment costing $78,000. This equipment has a 2-year life after which time it will be worthless. The firm uses straight-line depreciation and borrows funds at a 8 percent rate of interest. The com..
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $79,000 per year for the next two years, or you can have $68,000 per year for the next two years, along wi..
Determine the amounts of non operating assets and financial claims related to the retiree health and life benefits plans and pension plans that would be included in a valuation of GE.
You know the following. ATO, ITO and FATO are 2, 6, and 2.5 respectively while for the industry they are 4.4, 19 and 4 respectively. The current ratio and quick ratio are 1 and 1.5 for the firm and 2.3 and 2.0 for the industry respectively. Net profi..
Whats the monthly payment and how much is the borrowers income tax write off in the first year?
Mr. Miser loans money at an annual rate of 20 percent. Interest is compounded daily. What is the actual rate Mr. Miser is charging on his loans? How do you calculate compounding interest?
A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice-president of finance, has given you the following information and has asked you to compute the weighted average..
Rihab just got a new job and wants to roll over her retirement account from her previous job at a large corporation into an IRA. Rihab should speak to a finacial palnner to make sure she follows the rollover rules to avoid taxes.
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