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Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profit are driven by the amount of work Tom does. If he works 40 hrs a wk, the company's EBIT will be $550K per yr. The company is currently worth $2.7M. The company needs a cash infusion of $1.5M, and it can issue equity or issue debt with an interest rate of 9%. Assume there are no corporate tax.
a) What are the cash flows to Tom under each scenario?
b) Under which form of financing is Tom more likely to work harder?
c) What specific new costs will occur with each form of financing?
A mutual fund manager has a 20 million dollar portfolio with a beta of 1.50. The risk-free rate is 4.50 percent, and the market risk premium is 5.50%. The manager expects to receive an additional $5 million which she plans to invest in a number of st..
Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9% cost capital and is subject to a 40% tax rate.
Research a publicly held company of your choice, and access the company's Web page on the Internet to read its most recent annual report. The annual report is typically found in an "Investor Relations" or "Company Information" section within th..
Eastern has 4 million shares outstanding and no debt. Eastern's current price is $16.25. What is the maximum price per share that Dunbar should offer?
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Determine which type of computation would a person use to determine current value of a desired amount for the future
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Besides investment banking relationship , list at least three other sources of potential conflicts that can compromise an analyst's independence.
Common stock: 240,000 shares outstanding, selling for $64.80 per share, beta is .88 and will pay a dividend of $3.00 next year.The dividend is expected to grow by 5.3% per year indefinitely.
Vang, Inc., has an average collection period of 27 days. It's average daily investment in receivables is $86,000. What is the receivables turnover? What are annual credit sales?
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