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The JuneBug (JB) Corporation has a perpetual EBIT of $450,000. The rm is entirely equity nanced. The beta of the rm's stock is 1.24. You may assume that the risk free interest rate is 2% and that the market risk premium is 4.5%. The company's tax rate is 39%.
(a) What is the value of this unlevered company?
(b) Now suppose that the corporation wants to increase its market value to $5,000,000 by issuing perpetual bonds. Calculate the total market value of bonds that the JB Co. should issue to accomplish this goal.
(c) Assume the corporation issues $3,000,000 in perpetual debt (i.e. ignore your answer to part (b)). If the corporation's marginal tax rate decreases by 10%, what would you expect the new rm value to be?
The stock of Robotic Atlanta Corporation is trading at $40 each share. In the past, the firm has paid a constant dividend of $5 each share and it has just paid an yearly dividend.
Computation of receivables collection period and leverage effect of the debt and What is times interest earned
The truck will have no effect on revenues, but it is expected to save the firm $23,600 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 34 percent.
You sold a security for $980 that you purchased five years before for $795. What was the holding period return? Prove that this return overstates the annualized, compound return. Please explain how you got the answer.
Compute the cost of goods manufactured and cost of goods sold for Strike Marine Company for the most recent year using the amounts described below. Assume that raw materials inventory contains only direct materials.
Develop a set of family circumstances where each of term insurance and whole life insurance are the most appropriate type of policy to meet the consumer's needs. Explain why a whole life insurance policy requires a larger premium than a term insur..
An investment project costs $15,000 and hasannual cash flows of $3,800 for six years.
Consider a standard mortgage (360 months) with monthly payments and the nominal rate (monthly compounding) of 5.70%. What portion of the payments during first 31 months goes toward interest?
How determine the NPV by using required rate of return when there are no given cash flows.
Johnson Enterprises borrowed $100,000 on July 1, 2003 to finance the purchase of a building. The mortgage needs payments of $3225 to be made at the end of every quarter for fifteen years.
A linoleum producer has fixed expense of $70,000. Its product currently sells for $4 per unit and has a variable expense of $2.60 each unit.
The buying department has found an excellent global positioning system circuit card in Germany that can provide your company with a competitive advantage in the marketplace.
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