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The Dart Company is financed entirely with equity. The company is considering a loan of $1.76 million. The loan will be repaid in equal principal installments over the next two years, and it has an interest rate of 7 percent. The company’s tax rate is 30 percent. According to MM Proposition I with taxes, what would be the increase in the value of the company after the loan? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Increase in the value $
The HC method, which uses unadjusted historical costs, does not take into account depreciation expenses, purchasing power, and unrealized gains in replacement value. Despite these weaknesses as a financial reporting method, the HC method is used more..
Preferred Stock. Preferred Products has issued preferred stock with an $8 annual dividend that will be paid in perpetuity. If the discount rate is 12%, at what price should the preferred sell? At what price should the stock sell 1 year from now?
TAFKAP Industries has 2 million shares of stock outstanding selling at $16 per share, and an issue of $12 million in 8.0 percent annual coupon bonds with a maturity of 15 years, selling at 105 percent of par. Assume TAFKAP’s weighted average tax rate..
A cash-or-nothing call pays $10 if the underlying asset price is above the strike at expiration and 0 otherwise. Price the call in terms of sigma, K, S0, r, and T under the Black-Scholes assumptions. An asset-or-nothing call delivers the underlying a..
ABC firm has a debt to equity ratio of 2.3( that they wish to maintain) and new investments would cost $35 million this year. The firm expects earnings of 12 million this year. calculate the dividends paid and external equity financing required if th..
Jungle, Inc., has a target debt—equity ratio of 0.77. Its WACC is 11 percent, and the tax rate is 31 percent. If Jungle's cost of equity is 16 percent, what is the pretax cost of debt? If instead you know that the aftertax cost of debt is 5.7 percent..
Please explain the difference between the civil suit and criminal suits brought against Ralph Cioffi and Matthew Tannin. What were the charges in each lawsuit and what were the verdicts or settlements. Who were the other bankers charged civil or crim..
You are thinking about buying a car, and a local bank is willing to lend you $20,000 to buy the car. Under the terms of the loan, it will be fully amortized over 5 years (60 months), and the nominal rate of interest will be 12 percent, with interest ..
Rhiannon Corporation has bonds on the market with 22.5 years to maturity, a YTM of 6.90 percent, and a current price of $1,057. The bonds make semiannual payments. What must the coupon rate be on these bonds?
1. eleanor needs 40000 a year to live on in retirement net of the income she will receive. she will be retiring in 22
You are interested in obtaining a home equity loan. Your condo was purchased five years ago for $125,000 and now has a market value of $156,000. Originally, you paid $25,000 down on the condo and took out a $100,000 mortgage. The current balance on y..
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company's tax rate is 40%. W..
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