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Colt Systems will have EBIT this coming year of $33 million. It will also spend $14 million on total capital expenditures and increases in the net working capital, and have $8 million in depreciation expenses. Colt is currently an all equity firm with a corporate tax rate of 30% and a cost of capital of 12%.
a. if Colt is expected to grow by 8.1% per year, what is the market value of its equity today?
b. If the interest rate on its debt is 10%, how much can colt borrow now and still have non-neg net income this camping year? c. Is there a tax incentive today for Colt to choose a debt to value ratio that exceeds 85%?
Buffelhead's stock price is $221 and could halve or double in each six-month period (equivalent to a standard deviation of 97%). Assume that you own an American put option on Buffelhead stock with an exercise price of $221. Calculate the value of the..
What will be the final balance at the end of year 25 if you make a deposit of 4,000 at the end of year 2, 6,000 at the end year 7 and 8,000 at year 14 if the savings account pays 5% per period? Please explain how you got the answer, if in a table ple..
A call option on an S&P 500 futures contract has an exercise price of 1490; the call premium is currently $6.50. On the same date, a put option on the S&P 500 futures contract has an exercise price of 1490; the put premium is currently $7.50. The two..
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Union Local School District has bonds outstanding with a coupon rate of 3.7 percent paid semiannually and 26 years to maturity. The yield to maturity on these bonds is 4.3 percent and the bonds have a par value of $10,000. What is the price of the bo..
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What is the yield to maturity of a 23-year bond that pas a coupon rate of 8.25% per year, has a $1,000 par value, and is currently priced at $1,298.05? Assume semi-annual coupon payments. Round the answer to two decimal places in percentage form.
You are considering an investment in a new sub-industry of interest to your firm. To understand the importance of terminal value assumptions you have decided to calculate NPV under two different sets of assumptions. The appropriate discount rate for ..
Tony borrowed $10,000 from his sister at 8%, simple interest, and repaid the entire amount after 5 years. Show the cash flows on this deal.
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