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Suppose a world without taxes. Two company, Mix Corporation and Dial Corporation are identical in every way except for their capital structures. Mix, an all-equity firm, has 200000 shares of common stock outstanding; each share sells for $30. In addition to equity financing, Dial uses leverage; the market value of Dial's debt is $3,000,000, and the interest rate on this debt is 8 percent. Both firms are expected to have EBIT (Earnings before interest and taxes) of $700,000 each year for the foreseeable future. Suppose that investors can borrow and lend at the same rate as the firms. Show that the Modigliani-Miller Proposition I holds. (Hint: Show, by the way of example, that homemade leverage is a perfect substitute for corporate borrowing).
Beta Industries has a net income of $2,000,000 and it has $1,000,000 shares of common stock outstanding. The company's stock currently trades @$32 a share.
What are your thoughts on bankruptcy for small businesses - both good and bad? What are your perspectives of both the business owner and the creditor?
What TVM concept (s) is represented in the situation? What is the value of the money represented by the situation? How did you arrive a the value?
Jackie has a margin account with a balance of $45,000. If initial margin requirements are 50% and Turtle Industries is currently selling at $50 each share:
Find out the future value of investment after one year if it earns 10% per year? What is the present value of this future value discounted at 10%?
The Peach Company is thinking of building a new plant to put the peaches it grows into cans. The plant is expected to last for 20 years. Its initial cost is $20 mln.
How to Finding NPV and IRR from the given data of the Anderson International Limited is evaluating a project in Erewhon
Explain Capital budgeting involves calculation of modified internal rate of return and What is the project's modified internal rate of return
If the company does not consider real options, what is Project A's NPV and find what is project A's NPV considering the growth option
Calculate the PMT on a mortgage
Critically evaluate these comments. Please don't wander; concentrate on the issues stated by quotation.
Carl Foster, a trainee at an investment banking firm, is trying to get an idea of what real rate of return investors are expecting in today's marketplace. On the basis of the information that Carl has collected, what estimate can he make of the rea..
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