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ABC Company and DEF Company are competitors, and being in the same industry they have tried to be very similar to each other with one significant difference. The CEO of ABC hates debt and the CEO of DEF thinks that debt is good for the income statement and improves DEF's return on equity. Here are the salient facts to consider:• ABC Company has 10,000 shares of common stock outstanding, and each share is worth $20.• The capital structure of DEF Company is $50,000 in debt with interest payments at 12% annually.• The total capitalization of ABC and DEF are the same.• Both firms think they will have earnings of $55,000 a year continuously and because of their costs, neither firm pays any taxes. For the purposes of this problem, investors can also borrow money at 12% annually.
a) What is the value of ABC Company?
b) What is the value of DEF Company?
c) What is the market value of DEF Company's equity?
d) Why is ABC's equity more or less risky than DEF's equity?
Sales for Triad Inc. have grown from $2 million to $8.092 million in 10 years. What is the implied growth rate of sales for Triad?
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Shaid company issued $2,000,000 of 6 percent, ten year convertible bonds on June 1st, 1993 at 98 plus accrued interest. The bonds were dated April 1st, 1993, with interest payable April 1st and October 1se. Bond discount is amortized semiannually on ..
White company has a ROE of 14.5 percent and a payout ratio of 30 percent, what is its sustainable growth rate?
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The given return figures were computed using closing prices obtained from Yahoo Finance website for Harley Davidson. Calculate the average monthly return for the company and the standard deviation for these monthly returns.
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Research United and Continental Airline merger, measure the challenges experienced during the merger and resulting impact to the business.
Determining the future value of the investment and every year for the next six years in an investment paying
Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $6,000,000 bank loan to finance service equipment.
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