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1. Janetta Corp. has an EBIT rate of $975,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent, and the corporate tax rate is 35 percent. The company also has a perpetual bond issue outstanding with a market value of $1.9 million. a. What is the value of the company? b. The CFO of the company informs the company president that the value of the company is $4.8 million. Is the CFO correct? 2. Dream, Inc., has debt outstanding with a face value of $6 million. The value of the firm if it were entirely financed by equity would be $17.85 million. The company also has 350,000 shares of stock outstanding that sell at a price of $38 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs? 3. FFDP Corp. has yearly sales of $28 million and costs of $12 million. The company's balance sheet shows debt of $54 million and cash of $18 million. There are 950,000 shares outstanding and the industry EV/EBITDA multiple is 7.5. What is the company's enterprise value? What is the stock price per share? 4. The Newton Company has 50,000 shares of stock that each sell for $40. Suppose the company issues 9,000 shares of new stock at the following prices: $40, $20, and $10. What is the effect of each of the alternative offering prices on the existing price per share?
Comparable bonds in the market have a 6.5 percent annual coupon, 15 years to maturity, and are selling at 97.687 percent of par. What coupon rate should The Hot Dog Shack set on its bonds?
Assume that a coupon payment was made yesterday. If the yield to maturity for all three bonds is 8% what is the fair price of each bond?
Assume investors require a return of 12 percent on this stock. What is the current price? What will the price be in four years and in sixteen years?
Communicate in a manner that is professional and consistent with expectations for members of the business professions.
If Do=$2.25, g (which is constant) = 3.5% and Po=$78, what is the stocks expected divident yield for the coming year?
Use the Library to go to the SBA US Government, Small Business Administration web site. There is a vast amount of information available on this site.
1.what theory most identifies with the term structure of interest rates? and why? 2.what is evidence that does not
Douglass Gardens pays an annual dividend that is expected to increase by 4.1 percent per year. The stock commands a market rate of return of 12.6 percent and sells for $24.90 a share. What is the expected amount of the next dividend?
It has 800 million shares of common stock outstanding,and its stock price is $32 per share. What is Jaster'smarket /book ratio?
case write-up montefiore medical centerbased upon the activities of the hospitals heart center construct a
Three people in that car sustained bodily injuries; the driver's injuries were worth $20,000; a passenger received injuries worth $12,500; and another passenger received injuries of $17,000. How much will his insurance pay for their claims?
Treasury bills are currently paying 6 percent and the inflation rate is 2.60 percent.
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