Take Rf=4%, E[RM]=8%. Gamma Corporation has a CAPM beta of 1.1 and its earnings are expected to grow at 2% per year. Gamma Corp pays out 60% of its earnings. Investors who receive the dividend face a personal income tax rate of 20%. What is the P/E ratio of Gamma Corp? Your Answer:
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![Take Rf=4%, E[RM]=8%. Gamma Corporation has a CAPM beta of 1.1 and its earnings are
expected to
grow at 2% per year. Gamma Corp pays out 60% of its earnings. Investors who receive the
dividend face
a personal income tax rate of 20%.
What is the P/E ratio of Gamma Corp?
Your Answer:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc87558f8-8f1c-4706-b9e2-64a206b6068f%2F65560c7f-cb2d-4c49-876d-532da31c09fc%2F1dyhzh_processed.jpeg&w=3840&q=75)
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- Harmony Sego has a tax rate of 21%, the interest rate on debt is 10%, and the WACC is 15%. If the debt ratio is 60% (i.e., the weight on debt), what is the expected rate of return to equity holders? O 12.50% O 22.50% O 25.65% O 21.25%Choose the correct letter of answer: The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration? a. 1.6b. 2.6c. 3.6d. 4.6e. 5.6Wilde Software Development has an 11% unlevered cost of equity. Wwilde forecasts the following interest expenses, which are expected to grow at a constant 4% rate after Year 3. Wilde's tax rate is 25%. Year 1 Year 2 Year 3 Interest expenses $75 $110 $130 a. What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent. b. What is the total value of the interest tax shield at Year 0? Do not round intermediate calculations. Round your answer to the nearest cent. $
- You have been tasked with the responsibility of calculating the WACC for Meeks Investments Limited and Hall Developments Limited. The risk free rateis currently 4% and the market risk premium is 6.5%. The details for both companies are presented in the table below. the tax rate is 25%. MeeksInvestments Limited Hall Developments Limited Value of Common Equity $1,500,000 $3,000,000 Beta 2.18 1.52 Value of preferred Equity $1,000,000 $500,000 Preffered Dividends 4.50 $7.60 Priceof Preffered Stock $60 $80 Price of Bonds $970 $1,160 Coupon Rate (Paid semi- annually) 8% 11% par value of bonds $1,000 $1,000 years to Maturity 8 12 Value of Debt $2,500,000 $1,500,000 Use the information in the table above to calculate the WACC for both companiesVapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000,and its tax rate is 40 percent. Vapor Lock’s beta is 1.5.a. What is Vapor Lock’s DFL?b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentageincrease in net income?c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resultingnet income?The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed with 55% debt. Wei has $8 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.
- Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 4% rate after Year 3. Wilde’s tax rate is 25%. Year 1 Year 2 Year 3 Interest Expenses $80 $100 $120 a. What is the horizon value of the interest tax shield? b. What is the total value of the interest tax shield at Year 0?You have been tasked with the responsibility of calculating the WACC for Meeks Investments Limited and Hall Developments Limited. The risk-free rate is currently 4% and the market risk premium is 6.5%. The details for both companies are presented in the table below. The tax rate is 25%. Meeks Investments Limited Hall Developments Limited Value of Common Equity $1,500,000 $3,000,000 Beta 2.18 1.52 Value of Preferred Equity $1,000,000 $500,000 Preferred Dividends $4.50 $7.60 Price of Preferred Stock $60 $80 Price of Bonds $970 $1,160 Coupon Rate (Paid semi-annually) 8% 11% Par Value of Bonds $1,000 $1,000 Years to Maturity 8 12 Value of Debt $2,500,000 $1,500,000 Use the information in the table above to calculate the WACC for both companies.Wilde Software Development has an 11% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 3% rate after Year 3. Wilde's tax rate is 25%. Year 1 Year 2 Year 3 Interest expenses $85 $100 $125 What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent. $ What is the total value of the interest tax shield at Year O? Do not round intermediate calculations. Round your answer to the nearest cent. $
- Q. Western Lumber Company expects to have free cash flow in the coming year of $4.25mand is expected to grow at 4% per year thereafter. The company has an equity cost of10% and a debt cost of 6% and pays corporate tax at 30%. If the company maintains adebt-to-equity ratio of 0.50, what is the value of the interest tax shield? Please answer by providing step by step solution and explaining the whole process3)You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn’s has a reported equity beta of 1.4, a debt-to-equity ratio of .3, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn’s? 5)Lauryn’s Doll Co. had EBIT last year of $40 million, which is net of a depreciation expense of $4 million. In addition, Lauryn’s made $5 million in capital expenditures and increased net working capital by $3 million. Using the information from Problem 3, what is Lauryn’s FCF for the year?Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
