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1) Fells Cove uses no debt. The weighted average cost of capital is 10.4%. The current market value of equity is $25,000,000 and the corporate tax rate is 34%. What is EBIT?
2) You currently own 1200 shares of GSH Inc. GSH is an all equity firm that has 100,000 shares of stock outstanding and a market price of $42 per share. The company's EBIT are $780,000. You believe that GSH should finance 20% of assets with debt, but management refuses to leverage the company. Given that similar firms pay 6% interest on debt, a) how much money should you borrow to create the leverage on you own if you assume a 6% interest on borrowed funds? And b) How many additional shares of GSH do you need to purchase to create leverage on you own?
3) You currently own 800 shares of RBJ Inc. RBJ is an all equity firm that has 800,000 shares of stock outstanding with a market price of $36 per share. The company's EBIT are $6,200,000. RBJ has decided to issue $6,200,000 of debt at 10% interest. This debt will be used to repurchase shares of stock. Ignore taxes.
a) What is target debt to asset ratio? And b) How many shares of RBJ stock must you sell to undo the leverage if you can loan out funds at 10% interest?
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1. ebit taxes and leverage.nbsp kaelea inc. has no debt outstanding and a total market value of 90000.nbspnbsp earnings
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The firm's product market is considered stable, and the firm expects no growth, and all earnings are paid out as dividends. Assuming depreciation & amortization costs of $500,000 per year, calculate the firm's net income and EPS.
Which of the following best describes why firms produce financial statements?
How many years it take an investment to triple if the interest rate is 7% compounded annually? State the amount accumulated by each of the following present investmens: $4,000 in 10 years at 8% compounded annually.
Can you please explain the difference between obtaining funds from a venture capital firm and engaging in an IPO?
If you commence a project today, you will have initial costs of $16,000 and annual cash inflows of $9,900 for two years. If you wait until next year to start this project, your initial costs will increase to $17,500 and the annual cash inflow for eac..
one-year treasury bills currently earn 1.40 percent. you expect that one year from now 1-year treasury bill rates will
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