XYZ anticipates earning $1,800,000 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.
Q: Puckett Products is planning for $1.4 million in capital expenditures next year. Puckett's target…
A: Given:
Q: Steph & Sons has a capital structure that consists of 20 percent equity and 80 percent debt. The…
A: Capital structure can be define as the mix of different sources of capital issued by the companies…
Q: Flaherty Electric has a capital structure that consists of 70 percent equity and 30 percent debt.…
A: Weighted average cost of capital is the average cost of raising funds from various sources by the…
Q: Trident Corporation is currently worth $1,000,000. Its current debt-to-value (D/V) ratio is 40%. The…
A: 1. The market value of Trident Corporation would be $ 800,000 if it were unlevered. Vu = VL-T*D…
Q: The GIN Corp. is expected to pay a dividend of S3 which is expected to grow at 2% for a foreseeable…
A: WACC is the overall average cost of the all finance sources. It is equal to sum of product of cost…
Q: Lauryn’s Doll Co. had EBIT last year of $47 million, which is net of a depreciation expense of $4.7…
A: Given, EBIT $47 million Depreciation $4.7 million capital expenditures $7.25 million Net working…
Q: Blue Co. has a capital structure that consists of 25% equity and 75% liabilities. The company…
A: Given information, Capital structure consists of 25% equity and 75% liabilities. Net income…
Q: TGN Corporation generated FCF of $1,200,000 in the most recently completed year. FCF is expected to…
A: The free cash flow to the firm shows cash available to equity and debt provides after adjusting for…
Q: Lilly Inc has a DSO of 20 days, and its annual sales are $3,550,000. What is its accounts receivable…
A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: Corner Company is estimated to generate $18 million in available cash flow in the first year, and…
A: First year cash inflow = $ 18,000,000 Annual growth rate (G) = 5% WACC = 9% Number of shares (N) =…
Q: Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $8 billion in…
A: For calculating growth rate, first we need to find cost of equity by using WACC equation WACC =cost…
Q: Tartan Industries currently has total capital equal to $4 million, haszero debt, is in the 40%…
A: Calculation of Current Price per share and Current Price per share after recapitalization: Excel…
Q: Serenity Systems Inc. is expected to pay a $2.50 dividend at year end (D, = $2.50), the dividend is…
A: The weighted average cost of capital is the weighted average of the cost of equity, cost of debt and…
Q: The Gin Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable…
A: Weighted average cost of capital is the weighted cost of all sources of capital for a company. To…
Q: The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable…
A: GIVEN, d1=$3g=2%P0=$40n=10 par=$1000coupon =$80de=0.4tax =30%
Q: In their most recent fiscal year, XYZ, Inc. had net income of $20 million and total common equity of…
A: Given information : Net income = $20 million Total common equity = $200 million Dividend payout…
Q: Parker Investments has EBIT of $20,000, interest expense of $3,000, and preferred dividends of…
A: Financial leverage is a concept that refers to financing the purchase of assets with the borrowed…
Q: An analyst is trying to estimate the intrinsic value of VN Co. that has a weighted average cost of…
A: Let WACC = r = 10% FCF1 = P 3000 FCF2 = P 4000 FCF3 = P 5000 Growth rate after year 3 (g) = 6%
Q: Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $8 billion in…
A: (1) It is assumed that face value of share is $ 10 Total Assets = 8 billions common equity = 8…
Q: be used to fund the equity portion of the capital budget? Assuming the company has 400,000 issued…
A: Net income = P12,000,000 Capital budget = P 10,000,000 Equity percentage = 70%
Q: Plato, Inc., expects to have net income of $5,000,000 during the next year. Plato’s target capital…
A: Residual dividend policy is the policy in which the earnings of the company are first used for the…
Q: An analyst is trying to estimate the intrinsic value of Blue Co. that has a weighted average cost of…
A: Cost of Capital = 10% Free Cash Flows: Year Free cash flow 1 3000 2 4000 3 5000…
Q: Sorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is…
A: wacc formula is given as: WACC =wd×kd×1-tax+we×kewhere,wd= weight of debtwe= weight of equitykd=cost…
Q: SMPH has a strict residual dividend policy and they projected that the net result of their operation…
A: Net income = P12,000,000 Capital budget = P 10,000,000 Equity percentage = 70%
Q: Now calculate the cost of common equity from retained earnings using the CAPM method Current…
A: The expected return is the minimum required rate of return which an investor required from the…
Q: National Inc. has forecasted that its net income will be P520,000. The company has an debt-to-equity…
A: debt-to-equity ratio of 25% means that for every one 1P invested in the company, about 25% come…
Q: The company had pre-tax net income of $25mm last year and paid taxes of $10mm. The company has…
A: Total debt = $500 mm Shares issued = 45 mm Treasury stock = 5 mm Current price = $35 Pre tax cost of…
Q: Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target…
A: Ratio analysis is a method of measuring the financial position of the organization with different…
Q: Sora Industries has 65 million outstanding shares, $127 million in debt, $59 million in cash, and…
A: Free cash flow firm value model Under free cash flow valuation, the value of the firm is the sum of…
Q: Packaging's ROE last year was only 4%, but its management has developed a new operating plan that…
A:
Q: The Expanding Capital Corporation has a current capital structure of $15 million in secured bonds…
A: Part (1): Calculation of WACC before the new bond issue: Answer: WACC before the new bond issue is…
Q: XYZ anticipates eaming $1,800,000 and paying $300,000 in dividends this year. XYZ's capital…
A: Given:Anticipates earnings=$1800000Dividend=$300000Capital structure=20% debt and 80% equityTax…
Q: XYZ anticipates earning $1,000,000 and paying $200,000 in dividends this year. XYZ's capital…
A: Equity breakpoint is the financial term used to determine the breaking point after which the firm…
Q: Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the…
A: The Weighted Average Cost of Capital(WACC) refers to the financial ratio that calculates the overall…
Q: The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable…
A: Weighted average cost of capital = (Cost of equity * weight of equity) + (Cost of debt * Weight of…
Q: The Gin Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable…
A: The Weighted average cost of capital(WACC) refers to the method in which each category of capital is…
Q: You are trying to determine the WACC for a company. It has the following characteristics. The…
A: WACC: WACC or the weighted average cost of capital is the return that a company must earn in order…
Q: XYZ anticipates earning $1,500,000 and paying $300,000 in dividends this year. XYZ's capital…
A: Formulas: Equity break point = Addition to retained earnings / Weight of equity
Q: Last year, Headline News Corporation paid $600,000 in dividends and retained $360,000 of the…
A: Dividend: It is that share of the profit which is distributed among the company’s shareholders.
Q: Kahn Inc. has a target capital structure of 50% common equity and 50% debt to fund its $12 billion…
A: Price of share = Dividend1Cost of equity - growth rate Return on equity = net inocome equity×100
Q: Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a…
A: The weighted average cost of capital or WACC is one of the important financial concepts that is used…
Q: Bulldogs Inc. has forecasted that its net income will be P520,000. The company has an debt-to-…
A: Under residual model, amount of dividend paid to common stockholders is the balance of Net Income…
Q: Acme Inc. had net profits of $1,000,000 last year, has 100,000 shares outstanding and has maintained…
A: Net profit = $ 1,000,000 Number of shares = 100,000 Earning per share = 1,000,000/100,000 = $ 10…
Q: Blue Co. has a capital structure that consists of 25% equity and 75% liabilities. The company…
A: The solution requires the application of residual dividend policy. Here, the retained earnings would…
Q: CPA Corporation is a steel manufacturer that finances its operations with 40 percent debt, 10…
A: Debt = 40% Preferred stock = 10% Equity = 50% Interest rate on debt = 11% Preference dividend = $2…
Q: Steph & Sons has a capital structure that consists of 20 percent equity and 80 percent debt. The…
A: In this we have to determine the retained earning that would be equity structure of target capital…
Step by step
Solved in 2 steps
- 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?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:Sorenson Systems, Inc. is expected to pay a dividend of $3.30 at year end (D1), the dividend is expected to grow at a constant rate of 5.5% a year, and the common stock currently sells for $37.50 a share. The before-tax cost of debt is 7.5%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings?Your answer should be between 7.36 and 12.57, rounded to 2 decimal places, with no special characters.
- King Messi Corp. is expected to have $20 earnings before interest and taxes every year in perpetuity and a tax rate of 20%. The firm is financed with $100 in debt and the remainder with equity. The firm’s cost of debt is 5%. Its earnings after taxes are expected to be fully paid out as dividends. Based on this information, what is the total cash flow to debt and equity holders? Answers: 16 17 18 19 20A company’s capital structure consists solely of debt and common equity. It can issue debt at 15% interest rate, and its common stock is expected to pay a $5 dividend per share next year. The stock’s price is currently $40; its dividend is expected to grow at a constant rate of 3 percent per year; its tax rate is 30 percent and its WACC is 14 percent. Calculate the after-tax cost of debt and the cost of common equity. What percentage of the company’s capital structure consists of common equity?A company is financed with equity of $4.5 million and a bank loan of $2.5 million with an interest rate of 8.6% per annum. The EBIT is $1.12 million. The applicable tax rate is 19%. Use the above information to calculate the following: a) change in the return on equity and the degree of financial leverage given a 15% increase in EBIT next year, b) change in the return on equity and the degree of financial leverage given a 5% decrease in EBIT in the following year (the year following the year in which EBIT grew by 15%).
- Pack-and-Send, Inc. expects to have free cash flow of $6.5 million next year and this cash flow will grow at a rate of 6% per year thereafter. The firm's equity cost of capital is 9% and its debt cost of capital is 5%. Assume that Pack-and-Send has a corporate tax rate of 30%. If the firm maintains a debt-to-equity ratio of 0.60, the value of the firm's tax shield is closest to: options: $18.47 million $27.95 million $54.28 million $260.00 million None of the aboveThe 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.Sarensen Systems Inc. is expected to pay a dividend of $2.50 at year end (D), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $ 37.50 a share. The before -tax cost of debt is 7.50 %, and the tax rate is 40% . The target capital structure consists of 45% debt and 55% common equity.What is the company's WACC if all the equity used is from retained earnings?
- A company expected to have free cash flow in the coming year of $8 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. The company has an equity cost of capital of 13%, a debt cost of capital of 7%, and it has a 35% corporate tax rate. If the company maintains a .5 debt to equity ratio, then what is Flagstaff's pre-tax WACC?Percentages need to be entered in decimal format, for instance 3% would be entered as .03. Ezzell Enterprises has the following capital structure, which it considers to be optimal under present and forecasted conditions: Debt (long-term only) ratio - 45% Common equity - 55% Total liabilities and equity - 100% For the coming year, management expects after-tax earning of $2.5 million. Ezzell's past dividend policy of paying out 60% of earnings will continue. Present commitments from its bankers will allow Ezzell to borrow according to the following schedule: Loan Amount Interest Rate $1 to $500,000 9% on this increment of debt $500,001 to $900,000 11% on this increment of debt $900,001 and above 13% on this increment of debt The company's marginal tax rate is 40%, the current market price of its stock is $22 per share, its last dividend was $2.20 per share, and the expected growth rate is 5%. External equity (new common) can be sold at a flotation cost of 10%.…Altamonte Telecommunications has a target capital structure that consists of 60% debt and 40% equity. The company anticipates that its capital budget for the upcoming year will be $2,000,000. If Altamonte reports net income of $1,300,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio? Round your answer to two decimal places.