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Home Depot Inc. (HD) had 1.70 billion shares of common stock outstanding in 2008, whereas Lowes Companies,. Inc. (LOW) had 1.46 billion shares outstanding. Assuming Home Depot's 2008 interest expense is $696 million Lowes' interest expense is $239 million and a 40 percent tax rate for both firms, what is their break-even level of operating income. (i.e the level of EBIT where EPS is the same for both firms)?
Hardy Lumber has a capital structure which includes bonds, preferred stock, and common stock. Which of the following rights have most likely been granted to the preferred shareholders?
A person increases the amount of money he invests $10 per month. He invests $100 on the first month and makes a total 24 payments. How much will be accumulated in the account if the interest rate applied was 6% simple and compounded monthly?
The old machinery was purchased for $1 million 3 yrs ago, and is being depreciated on a straight-line basis over its 5 year life. Its economic life as of today, however, is estimated to be 5 years. It can be sold for $300,000 today.
A bond currently sells for $1,120, which gives it a yield to maturity of 5%. Suppose that if the yield increases by 25 basis points, the price of the bond falls to $1,070. What is the duration of this bond?
You used Dell as a representative company to estimate the cost of capital for GCI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
The Grain and Feed Store purchases are equal to 68 percent of the following quarter's sales. The accounts receivable period is 15 days and the accounts payable period is 30 days. Assume there are 30 days in each month. The store has estimated quarter..
AJAX Company paid a dividend today of $4 per share. The dividend is expected to grow at a constant rate of 5% per year. If AJAX Company stock is selling for $56 per share, the stockholders' expected rate of return is
ABC Company sells 2,412 chairs a year at an average price per chair of $182. The carrying cost per unit is $22.78. The company orders 344 chairs at a time and has a fixed order cost of $113.3 per order. The chairs are sold out before they are restock..
The firm estimates the revenues and expenses for the new and the old lathes to be as shown in the following table. The firm is subject to a 40% tax rate. Should the new lathe be purchased?
Sunburn Sunscreen has a zero coupon bond issue outstanding with $20,000 face value that matures in one year. The current market value of the firm’s assets is $20,900. The standard deviation of the return on the firm’s assets is 26% per year, and the ..
Tim Smith is shopping for a used car. He has found one priced at $4,000. The salesman has told Tim that if he can come up with a down payment of $700, the dealer will finance the balance of the price at an annual rate of 15% over 4 years (48 months)...
Debt financing is more risky for firms than preferred stock financing because
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