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1. The Grist Mill has no debt. The firm has a total market value of $245,000 with 10,000 shares of stock outstanding. The firm has expected EBIT of $14,000 if the economy is normal and $17,000 if the economy booms. The firm is considering a bond issue of $49,000 with an attached interest rate of 8 percent. The bond proceeds will be used to repurchase shares. The tax rate is 34 percent. Compute the EPS after the repurchase for both a normal and a boom economy. What is the percentage increase in EPS if the economy booms rather than being normal?
A. 18.78%
B. 21.42%
C. 19.84%
D. 29.76%
E. 19.29%
2. Roy and Barbara are near retirement. They have a joint life expectancy of 25 years in retirement. Barbara anticipates their annual income in retirement will need to increase each year at the rate of inflation, which they assume is 4%. Based on the assumption that their first year retirement need, beginning on the first day of retirement, for annual income will be $47,500, and an annual after-tax rate of return of 6.5%, calculate the total amount that needs to be in place when Roy and Barbara begin their retirement.
a. $743,590.43.
b. $859,906.74
c. $892,478.21.
d. $906,131.31.
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What should be the prices of the following preferred stocks if comparable securities yield 6.5%?
Edwards Electronics recently reported $10,125 of sales, $4,950 of operating costs other than depreciation, and $1,125 of depreciation. The company had no amortization charges, it had $3,150 of bonds that carry a 5.25% interest rate, and its federal-p..
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The Redford Investment Company bought 120 Cinema Corp. warrants one year ago and would like to exercise them today. The warrants were purchased at $29 each, and they expire when trading ends today (assume there is no speculative premium left). If the..
Consider the following two mutually exclusive projects: If you apply the payback criterion, which investment will you choose? Why? If you apply the discounted payback criterion, which investment will you choose? Why?
What is the relationship between the two series? - Build a time series model using yields of AAA bond as the dependent variable and yields of BAA bond as independent variable.
Which of the following four investments has the highest PV? (Assume your required rate of return is 5% annually)
bull write a brief company history including a mission statement if available.section iibull thoroughly explain at
Rowan Company has a net profit margin of 8.3 percent, debt ratio of 50 percent, total assets of $5,087,200, sales of $6,738,600, and a dividend payout ratio of 65 percent. The firm’s management desires a sustainable growth rate (SGR) of 12 percent bu..
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