A company just issued $140000 of perpetual 9% debt and used the proceeds to repurchase stock. The company expects to generate 121000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 10% and the tax rate is 40%. Use FTE to calculate the value of the company's equity. Your Answer:

RDJ Corp. has expected earnings before interest and taxes (EBIT) of $5,000 (assumed to continue forever). Its unlevered cost of capital is 13.0% and its corporate tax rate is 35%. The company would like to borrow debt that amounts to $2,000 and use the proceeds to buy back shares. This debt has a 7.0% annual interest rate and pays interests annually. What is the firm's cost of equity, after this capital conversion? O A. O B. O C. O E. 10.05% 13.33% 15.14% OD. 13.82% 12.65% B 10 19 28 37 46 Finis

XYZ anticipates earning $1,000,000 and paying $200,000 in dividends this year. XYZ's capital structure is 20% debt and 80% equity and its tax rate is 35%.  Compute the equity breakpoint to the nearest dollar.   Your Answer:

A company just issued $453000 of perpetual 5% debt and used the proceeds to repurchase stock. The company expects to generate 107000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 14% and the tax rate is 25%. Use APV method to calculate the value of the company with leverage. Your Answer: Answer

A company finances its operations with 57 percent debt and the rest using equity. The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%

Johnson Tire Distributors has debt with both a face and a market value of $90,000,000. This debt has a coupon rate of 7 percent and pays interest annually. The expected earnings before interest and taxes is a constant $50,000,000 in perpetuity. The company's tax rate is 25 percent, and the unlevered cost of capital is 25 percent. What is the firm's cost of equity? Write your answer as a percent rounded to two digits, but don't include the % sign (i.e. enter 12.63, not 0.1263). HINT: You need to use both M&M propositions. Numeric Response

XYZ anticipates earning $1,500,000 and paying $300,000 in dividends this year. XYZ's capital structure is 20% debt and 80% equity and its tax rate is 35%.  Compute the equity breakpoint to the nearest dollar.   Your Answer:

Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the company’s outstanding bonds is 7.75%, its tax rate is 25%, the next expected dividend is $0.65 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $14.00 per share, the flotation cost for selling new shares is F = 10%, and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?   9.96%   7.98%   10.12%   8.75%   8.23%

Ashely Corporation has 80 million outstanding equity shares and the following projected financial information for the next four years. The tax rate is 25%. Ashely’s cost of capital is 13%. Assume Ashely is fully financed with equity.     Year 1 2 3 4 Earnings Forecast ($millions)           1 Sales   474.28 520.31 571.88 728.99 2 Cost of Goods Sold 269.53 308.19 335.68 490.25 3 Selling, General & Admin. 102.05 108.25 105.24 135.76 4 Depreciation   12.00 15.00 12.50 15.50 5 Net Income   68.03 66.65 88.85 65.61 Capital Requirements ($millions)           6 Capital Expenditures 8.80 11.50 10.60 12.50 7 Increase in Net Working Capital 6.80 7.20 8.25 9.15   Ashely’s CFO wants to use P/E ratio to value the stock’s terminal value in year 4. The CFO forecasts the industry P/E ratio in year 4 is 20. Based on the forecasted P/E ratio, what is the…

Assume that you are on the financial staff of Jerry Inc., and you have collected the following data: The yield on the company's outstanding bonds is 8.75%; its tax rate is 40%; the next expected dividend is $0.75 a share; the dividend is expected to grow at a constant rate of 7.00% a year; the price of the stock is $15.00 per share; and the target capital structure is 40% debt and 60% common equity. What is the firm's WACC? 9.04% 9.80% 8.44% O7.64% 9.30%