User Account

All Pages

What is the value of firm b interest tax shield

Assignment Help Finance Basics
Reference no: EM132952899

Assume that capital markets are perfect except for the presence of taxes. Firm B has a market value of equity of $150 million and a market value of debt of $30 million. It is expected to keep its leverage ratio (D/(D+E)) constant. Its pre-tax cost of debt is 5%. Its marginal corporate tax rate is 20%. Firm B's first cash flow arrives next year and its expected free cash flow next year is $12 million. Its expected permanent growth rate of free cash flow is 2%.

(a) What is Firm B's WACC?

(b) What is the value of Firm B's interest tax shield?

Reference no: EM132952899

Questions Cloud

What is the profitability index for project : If the opportunity cost of capital is 11%, what is the profitability index for each project?
What type of business would they be after the revocation : What type of business would they be after the revocation, and (3) how would DataDyn's income for the year treated in the year of termination
Calculate firm a free cash flow : In 2012, Firm A had sales of $500 million, COGS of $210 million, SGAE of $70 million, depreciation (not included in COGS or SGAE) of $60 million, and a decrease
Differentiate between static vs flexible types of budgets : Differentiate between the 2 types of budgets ( static vs flexible). Provide an example of the type of business or company that would benefit from using flexible
What is the value of firm b interest tax shield : Assume that capital markets are perfect except for the presence of taxes. Firm B has a market value of equity of $150 million and a market value of debt of $30
What is Rudyard diluted EPS : Each share of preferred stock is convertible into four shares of common stock. What is Rudyard's diluted EPS (rounded)
Discuss the possible risks and benefits : Discuss the possible risks and benefits that could be realised from the use of the AFRA system to identify individual users who wish to apply for or renew
How much is the amount of the current manufacturing costs : How much is the amount of the current manufacturing costs? DynaSpa manufactures solar spa heaters and employs a job-order costing system.
What are the limitations of services : Question - What are the limitations of services that can be provided by a BAS agent compared to those of a Tax Agent

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd