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Good Time Company is a regional chain department store. It will remain in business for one more year. The probability of a boom year is 80 percent and the probability of a recession is 20 percent. It is projected that the company will generate a total cash flow of $196 million in a boom year and $87 million in a recession. The company's required debt payment at the end of the year is $121 million. The market value of the company’s outstanding debt is $94 million. The company pays no taxes. a. What payoff do bondholders expect to receive in the event of a recession? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g. 1,234,567).) Payoff $ b. What is the promised return on the company's debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Promised return % c. What is the expected return on the company's debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)
How would an increase in the current price of Microsoft stock, from $30 to $31 per share, affect the value of the original option?
Acort Industries has 15 million shares outstanding and a current share price of $50 per share.What is Acort's equity cost of capital?
MLK, Inc. wants to issue new 15-year bonds for some much-needed expansion projects. The company currently has 6.5 percent coupon bonds on the market that sell for $975.00, make semi annual payments, and mature in 15 years. What coupon rate should the..
Suppose that you have $1 million and the following two opportunities from which to construct a portfolio: Risk-free asset earning 8% per year.
Stan wants to save for his retirement in 30 years. how will the results change if he begins saving at the beginning of the current month?
Most corporations pay quarterly dividends on their common stock rather than annual dividends. What is your value for the current share price now?
Minnesota Metal Forming Company has just invested $500,000 of fixed capital in a manufacturing process, which is estimated to generate an after-tax annual cash flow of $200,000 in each of the next 5 years. At the end of year 5, no further market for ..
Forty percent of earnings is paid out in dividends. What is the firm's dividend yield?
Payment dates. Determine when a firm must pay for purchases made and invoices dated on November 25 under each of the following credit terms
US News and World offered a graphic that displayed a lifelong retirement timeline. How does it impact an individual’s capacity to accumulate assets?
Describe how gifts relate to income taxes, including determining the tax basis of gifted property. Give some examples of the tax basis of gifts to the donee when the FMV is more than the donor's basis and if FMV is less than the donor's basis.
(Leverage and EPS) You have developed the following pro forma income statement for your corporation. If sales should increase by 25 percent. by what percent would earnings before interest and taxes and net income increase? If sales should decrease by..
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