Assets Liabilities and Shareholders' Equity Asseta (book value) $80 Debt $30 Equity $50 $80 $80 Unfortunately, the company has fallen on hard times. The 5 million shares are trading for only $4 apiece, and the market value of its debt securities is 404 below the face (book) value. Suppose shareholders now demand a 204 expected rate of return. The bonds are now yielding 144. a. What is the firm's weighted-average cost of capital if the firm's tax rate is 214? b.If the company considers a normal project whose risk is about the same as the company's risk with an internal rate of return of 134, should it accept the project? Why or why not?
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- Give typing answer with explanation and conclusion A company has 6.11 million common shares outstanding and $71 million of debt with an interest rate of 5.2%. The company wants to raise another $56.8 million. It can do so by selling an additional 3.055 million shares of common stock (the equity plan) or by taking out a bank loan with an interest rate of 6.8% (the debt plan). The company has no preferred stock. The corporate tax rate is 27%. At what level of EBIT would the company have the same earnings per share (EPS) under either plan? Specify the answer in $ mln., to the nearest $0.01 mln., drop the $ symbol.1.Unikai company LLC have some surplus funds for a short period of time which they want to invest in some short-term securities. Which of the following is not an appropriate source for the company? a.All of these b.Commercial paper c.Equity shares d.Treasury bills 2.In Muscat SAOG company, there are 400000 shares and the management declared OMR 800000 as net profit. What would be the earning per share? a. OMR 5 b. None of the options c. OMR 4 d. OMR 2The following table presents information for Golden Fleece Financial. Long-term debt outstanding Current yield to maturity on debt Number of shares of common stock Price per share Book value per share Expected rate of return on stock Cost of capital $470,000 % $ $ 9.00% Calculate the company cost of capital. (Ignore taxes. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) 18,500 67 42 18.00%
- The following table presents information for Golden Fleece Financial. Long-term debt outstanding Current yield to maturity on debt Number of shares of common stock Price per share Book value per share Expected rate of return on stock $ 340,000 8.50% 12,000 $54 $ 29 16.00% Calculate the company cost of capital. Note: Ignore taxes. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. X Answer is complete but not entirely correct. Cost of capital 988,000.00 %Flimsy Safe Room’s, Inc. has total assets of $1,000,000. The firm has $100,000 in inventory. It has $300,000 in long-term debt and $400,000 in current assets. The common stockholders’ equity is $400,000. The firm does not have any preferred stock outstanding. What is Flimsy Safe Room's total debt ratio defined as total liabilities to total assets? Question 1 options: A) 0.6 = 60% B) 0.4 = 40% C) 0.5 = 50% D) 0.3 = 30%5. You are given the following information for company's Financial: Long-term debt outstanding: Current yield to maturity (r debt): Number of shares of common stock: Price per share: Book value per share: Expected rate of return on stock (requity): a) Computed company's cost of capital. Ignore taxes. $300,000 8% 10,000 $50 $25 15%
- Appliances, Inc. has no debt outstanding, and its financial position is given by the following data: Assets (market value = book value) $5,000,000 EBIT $800,000 Cost of equity 12% Stock price $10 Shares outstanding 500,000 Tax rate 25% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 20% debt based on market values, its cost of equity will increase to 13% to reflect the increased risk. Bonds can be sold at a cost of 6%. Appliance, Inc. is a no-growth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time. As a creditor, you are concerned about the company’s ability to repay its debt and interest. What is the new times interest earned?Ma1. Please give only typed answer. Wail Inc. is currently a firm that has 2 million shares of stock outstanding with a market price of $25 a share and outstanding debt of $30 million. The debt interest rate is 10%. Its cost of equity is 17 percent and the tax rate is 35 percent. For some reason related to one of the controlling shareholders' preference, the company wants to get rid of all its debt. Before recapitalization, what is the value of the firm? $25,000,000 $20,000,000 $80,000,000 $30,000,000 $50,000,000Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Debt $ 55 45 Equity $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets. Balance $ 55 210 $ 265 Sheet Debt a. PV tax shield b. WACC c. New value of the firm Equity $75 25 $100 Assume that MM's theory holds except for taxes. There is no growth, and the $75 of debt is expected to be permanent. Assume a 21% corporate tax rate. $75 190 $265 a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if rDebt = 7.3% and rEquity = 15.7%? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new…
- Morgan Stanley has a current cash flow (at time 0) of $3.4 m and pays no dividends. The present value of the company's future cash flows is $14.6 m. The firm is entirely financed with equity and has 400,000 shares outstanding. Assume the dividend tax rate is zero. a. What is the share price of Morgan Stanley stock? b. Suppose the board of directors of Morgan Stanley announces its plan to payout 40% of its current cash flow as dividends to its shareholders. How can Andy, who owns 800 shares of Morgan Stanley stock, achieve a zero payout policy on his own? formulation: DPS= Tol Div (or excess cash) / No. of share [for unlevered firm] Share price = V/no. of share P ex-div = P - DPS EPS= Earnings (assume a constant) / no. of share P.E. = stock price/ EPS No. of share repurchase = Excess Cash / Stock Price1. A. the following data apply to Jacobs and Associates (millions of dollars): Cash and marketable securities $ 100.00 Net income%= $ 50.00 Fixed assets =$ 283.50 Sales =$1,000.00 Quick ratio =2.0 Current ratio= 3.0 DSO =40.55 days ROE =12% Jacobs has no preferred stock-only common equity, current liabilities, and long-term debt. Find Jacobs's A. Accounts receivable, B. Current liabilities, C. Current assets, D. Total assets, E. ROA, F. Common equity, and G. Long-term debt. 1B. in part A, you should have found Jacobs's accounts receivable = $111.1 million. If Jacobs could reduce its DSO from 40.55 days to 30.4 days while holding other things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing the amount of common equity, how would this affect i. The ROE ii. The ROA iii. The ratio of total debt to total assets?The following data apply to Cavendish & Company in ($m) Cash & Marketable Securities $ 100 Fixed Assets $ 283.5 Sales $ 1000 Net Income $ 50 Quick Ratio 2 Current Ratio 3 Day’s Sales Outstanding 40 Days (assume 365 days a year) ROE 12% Cavendish has no preferred Shares—only common stocks, current liabilities and Long term debt. Find Cavendish’s: Accounts Receivable Current Liabilities Current Assets Total Assets Turnover