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Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 705,000 shares of stock outstanding. Under Plan II, there would be 455,000 shares of stock outstanding and $6.25 million in debt outstanding. The interest rate on the debt is 11 percent, and there are no taxes. Requirement 1: Use M&M Proposition I to find the price per share of equity. Share price $ Requirement 2: What is the value of the firm under Plan I? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Value of the firm $ Requirement 3: What is the value of the firm under Plan II? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Value of the firm $
Elly's hot dog emporium is famous for its chilidogs. Elly's latest sales indicate that 25% of the customers ordering her chilidogs order it with hot peppers. Suppose 17 customers are selected at random. What is the probability that fifteen or more cu..
Firm H's shares sell today for $62 and are forecast to be priced at $77.50 and to pay a dividend of $1.80 at the end of one year. Firm H's beta is 0.80, the market risk premium is 5.5%, and the riskless return is 2%. The expected return less the requ..
Your portfolio is worth $100,000 and has a beta of 1.12. You have $30,000 of stock A which has a beta of 1.50. The rest of your portfolio is composed of stock B with a beta of 0.84 and stock C with a beta of 1.06. What is the value of stock C in your..
Are the following statements consistent or inconsistent? Explain your answer and discuss how equilibrium is achieved between the futures and cash markets. Futures markets serve an important function of the global financial markets by giving investors..
Modern Artifacts can produce keepsakes that will be sold for $60 each. Non depreciation fixed costs are $2,500 per year, and variable costs are $30 per unit. The initial investment of $4,000 will be depreciated straight-line over its useful life of 5..
You purchased a five year annual payment 6% coupon bond for $1,000 and you planned on holding it to maturity. However right after you bought the bond it was called at $1,043.29 when all interest rates fell to 5% and remained there for the full five y..
Figurate Industries has 750,000 shares of cumulative preferred stock outstanding. It has passed the last three quarterly dividends of $2.50 per share and now (at the end of the current quarter) wishes to distribute a total of $12 million to its share..
Barenbaum Industries projects that cash outlays of $4.5 million will occur uniformly Optimal Cash throughout the year. Barenbaum plans to meet its cash requirements by periodically. Transfer selling marketable securities from its portfolio. The firm’..
Consider the following option portfolio. You write a July 2007 expiration call option on IBM with exercise price $90. You also write a July expiration IBM put option with exercise price $85. What will be the profit/loss on this position if IBM is sel..
North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $9 per share. With the passage of time, yields have gone down from the original 10% to 8%. What was the original issue price? What is the current value of t..
Explain and discuss the impact of the internet on working capital management based on the textbook reading and your own experience
Your firm needs a computerized machine tool lathe which costs $58,000 and requires $12,800 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category...
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