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Liverpool Ferries is a navigation company. Until last year Liverpool had no debt, and last year its operations had an expected net income of 2 million GBP. At the end of the year the company undertook some debt so that the debt-to-equity ratio is now equal to 1.6 and will be kept constant by the company. There is one ferry that will be fully depreciated in the next three years, with annual depreciation installments of 300,000 GBP each. After that all assets will be fully depreciated and no new asset will be acquired. The expected return on levered equity for Liverpool is 14.60% and the cost of debt is 8%. The tax rate on corporate earnings is 23% and the depreciation tax shield is as risky as the other unlevered cash-flow of the company. What is the value of Liverpool's asset, if the expected EBITDA of the company is constant?
During the year, the Senbet Discount Tire Company had gross sales of $1.07 million. The firm’s cost of goods sold and selling expenses were $526,000 and $216,000, respectively. The firm also had notes payable of $810,000. These notes carried an inter..
A 7-year, 5 percent coupon bond has a yield to maturity of 4 percent. A portfolio manager with a four-year horizon needs to forecast the total return on the bond over the coming four years. In four years, the yield to maturity on this bond is expecte..
Rowan Company currently has a net profit margin of 8.3 percent, debt ratio of 43 percent, total assets of $4,346,703, sales of $5,724,548, and a dividend payout ratio of 55 percent. The firm’s management desires a sustainable growth rate (SGR) of 13 ..
What major factors should the company be aware of as it evaluates possible investment projects in the future? Would you be interested in investing in this company? Why or why not? Are there additional factors that aren't a part of this case that you..
The parents anticipate college costs of $25,000 a year (per child). These costs must be paid at the end of each year. If each child takes four years to complete their college degrees, then how much money must the couple save each year?
A comparable property sold for $5,000,000. The appraiser determined that the sale price included favorable financing from the seller worth $250,000. What is the indicated value of the subject property based on price per square foot? What is the indic..
The ABC Construction Company is considering the purchase of a diesel power shovel to improve its productivity. The company finances the purchase by borrowing from a local bank with no rite with the compounded interests (annual nominal interest The ha..
The Florida lottery agrees to pay the winner 256,000 at the end o each year for 20 years. What is the future value of this prize if each payment is put in a account earning0.10
Suppose the Federal Reserve raises shortterm interest rates, an action that is likely to reduce aggregate output temporarily.- Describe the various effects on the profits of commercial banks.
Cost of Common Equity The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 4% per year. Carpetto's common stock currently sells for $30.00 per share; its last dividend was $2.50; and it will pay a ..
Calculate the cost of unlevered equity if the cost of equity is 20%, the cost of debt is 7%, and the capital is 50% equity and 50% debt.
What proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8% and the firm's ROE is 20%? You borrow a $328,000 add-on-interest loan from the credit union and will repay in equal installments over 19 years. The no..
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