Morrow Corp. has an EBIT of $935,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 14 percent and the corporate tax rate is 21 percent. The company also has a perpetual bond issue outstanding with a market value of $2.6 million. What is the value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g.. 1,234,567.89)

a. Richard owns $33,000 worth of XYZ's stock. What rate of return is he expecting? Rate of return b. Calculate the cash flows and rate of return by investing in ABC, and using homemade leverage, how Richard could generate exactly the same? Total cash flow Rate of return ABC XYZ % c. What is the cost of equity for ABC? What is it for XYZ? Cost of equity ABC XYZ $ d. What is the WACC for ABC? For XYZ? WACC %

Maddux Corporation has an EBIT of $835,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 16 percent and the corporate tax rate is 21 percent. The company also has a perpetual bond issue outstanding with a market value of $2.1 million. What is the value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) Value of the company

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $30 million gaming center: a. Issue $34 million of 6% bonds at face amount.b. Issue 1 million shares of common stock for $34 per share. 1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.)   Issue Bonds Issue stock   Operating income 10,900,000 10,900,000 Interest expense (bonds only)     Income before tax     Income tax expense (40%)     Net Income     Number of shares 3,900,000 4,900,000 Earnings per share

Muffin's Masonry Incorporated's balance sheet lists net fixed assets as $31 million. The fixed assets could currently be sold for $53 million. Muffin's current balance sheet shows current liabilities of $14.0 million and net working capital of $13.0 million. If all the current accounts were liquidated today, the company would receive $8.10 million cash after paying the $14.0 million in current liabilities What is the book value of Muffin's Masonry's assets today and the market value of these assets? Note: Enter your answers in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) Current assets Fixed assets Total BOOK VALUE MARKET VALUE (in millions of dollars) $ 0.00 $ 0.00

2. National Business Machine Co. (NBM) has $4.9 million of extra cash after taxes have been paid.  NBM has two choices to make use of this cash.  One alternative is to invest the cash in financial assets.  The resulting investment income will be paid out as a special dividend at the end of three years.  In this case, the firm can invest in either Treasury bills yielding 3% or 5% preferred stock.  IRS regulations allow the company to exclude from taxable income 70% of the dividends received from investing in another company's stock.  Another alternative is to pay out the cash now as dividends.  This would allow the shareholders to invest on their own in Treasury bills with the same yield or in preferred stock.  The corporate tax rate is 21%.  Assume the investor has a 31% personal income tax rate, which is applied to interest income and preferred stock dividends.  The personal dividend tax rate is 15% on common stock dividends.  Should the cash be paid today or in three years?  Which of…

Fields & Company expects its EBIT to be $107,000 every year forever. The company can borrow at 7 percent. The company currently has no debt and its cost of equity is 11 percent. The tax rate is 21 percent. The company borrows $162,000 and uses the proceeds to repurchase shares. a. What is the cost of equity after recapitalization? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity b. WACC % %

Hunter Corporation expects an EBIT of $30,000 every year forever. The company currently has no debt and its cost of equity is 14 percent. The tax rate is 20 percent. The company is able to borrow at 8 percent. What will the value of the company be if it takes on debt equal to 60 percent of its levered value? [Note: the proceeds from issuing new debt are used to repurchase Hunter's equity.] O $251,488.1 $194,805.2 O $274,285.8 O $171,428.6

Cha Cha Corporation has three long term loans (interest bearing debt):  a loan of $100,000 at 6% interest, a loan of $100,000 at 8% interest, and a loan of $100,000 at 14% interest.  The company has accounts payable of $50,000 (non-interest bearing) and equity of $200,000.  It estimates that its cost of equity is 12%.  Its tax rate is 35%. A. What is Cha Cha Corporation’s weighted average after tax cost of interest-bearing debt? B. What is Cha Cha Corporation’s weighted average cost of capital on interest bearing debt and equity?