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The CIG Power Corporation expects to report earnings before interest and taxes of $25 million this year. Management has determined that the firm needs $10 million of new capital this year to fund its anticipated capital investments. One alternative is to borrow the funds from a syndicate of banks at a 15 percent rate of interest. Alternatively, CIG could sell $10 million of a new preferred stock that pays annual dividends of $1.4 million. The marginal tax rate for CIG is 40 percent.
a. What will be the "earnings after tax and available for common stockholders" if the money is borrowed?
b. What will be the "earnings after tax and available for common stockholders" if preferred stock is sold?
4. Patriot Industries recently sold its fin fabrication machine for $150,000. The machine originally cost $500,000 and has a current book value of $100,000. Patriot's marginal tax rate is 35 percent for ordinary income and 35 percent for capital gains income.
a. What amount of gain has Patriot received from this transaction?
b. Is this a capital or ordinary gain?
c. How much tax must Patriot pay on this transaction?
Helen recently get a credit card with a nominal interest rate of 21%. With the help of card, she buy some new clothes for 250 dollar. The minimum payment on the card is only 20 dollar every month.
Chatham Craft's capital structure consists of 30 million dollar of debt and 90 million dollar of equity. The Corporations's CFO has provided the following information: interest rate on debt is 8 percent.
What is the list of the most popular functional currencies and what are the functional currency percentages?
At the maturity of the Treasury bond futures contract, the duration of the underlying benchmark Treasury bond is nine years. What position should the fund manager undertake to mitigate his interest rate risk exposure?
Find the weighted average cost of capital and if Company X wants to change its capital structure (i.e., lower its WACC), what should it do?
Describe the difference between sensitivity analysis & scenario analysis. Offer an argument for the proposition that scenario analysis offers a more realistic picture of a project.
Multiple choice questions on stock valuation - Pluto's is offering a preferred stock for sale. This stock will pay an annual dividend of $6. If your required return is 6 percent, Find how much are you willing to pay for one share of this stock ?
With the help of following data estimate the annual loan payment, using function wizard for PMT.
what per visit price must be set for the service to break even? What price must be set to earn an annual profit of $100,000 and repeat part A, but assume that the variable cost per visit is $10.
What change would you expect in the required return for each of the stocks and what change would you expect in the required return for each of the stocks?
The last dividend paid (D0) was $1. What is the value per share of your firm's stock and Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%.
Would this make the model 800 machine more or less desirable and Repairs and maintenance costs on a model 800 machine, with a model 400 machine used as standby, would total $3,800 per year
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