You are told that one corporation just issued $100 million of preferred stock and anotherpurchased $100 million of preferred stock as an investment. You are also told that one firmhas an effective tax rate of 20%, whereas the other is in the 35% tax bracket. Which firm ismore likely to have bought the preferred? Explain.

Sandhill Co. has a capital structure, based on current market values, that consists of 25 percent debt, 19 percent preferred stock, and 56 percent common stock. If the returns required by investors are 8 percent, 12 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Sandhill’s after-tax WACC? Assume that the firm’s marginal tax rate is 28 percent.

Suppose that MNINK industries' capital structure features 63 percent equity, 7 percent preferred stock, and 30 percent debt.  If the before-tax component costs of equity, preferred stock, and debt are 11.60 percent, 9.5 percent, and 9 percent, respectively, what is MNINK's WACC if the firm faces an average tax rate of 21 percent and can make full use of the interest tax shield?

Hawar International is a shipping firm with a current share price of $4.50 and 10 million shares outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $10 million and repurchasing shares. a. With perfect capital​ markets, what will the share price be after this​ announcement? b. Suppose that Hawar pays a corporate tax rate of 40%​, and that shareholders expect the change in debt to be permanent. If the only imperfection is corporate​ taxes, what will the share price be after this​ announcement? c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $4.55 after this​ announcement, what is the PV of financial distress costs Hawar will incur as the result of this new​ debt?       Question content area bottom Part 1 a. With perfect capital​ markets, what will the share price be after this​ announcement?   With perfect capital​ markets, the share price will be ​$enter your response here per share

What is the WACC for Snuggly Baby Corp. if the tax rate is 25.00% and the firm has 6,182,000.00 shares of common equity priced at $14.00 each with an expected return of 19.74% and an expected real return of 14.61%; 1,001,000.00 shares of preferred equity priced at $32.00 each with an expected return of 16.14% and an expected real return of 11.16%; and 78,600.00 bonds that are priced at $923.00 each, and have a current yield of 11.22%, a yield-to-maturity of 11.63%, and a coupon rate of 10.38%?(Round the value to 100th decimal)

Salalah Mineral water has found that its cost of common equity capital is 18 percent and its cost of debt capital is 8 percent . If the firm in financed with 60 percent common shares and 40 percent debt then what is the after - tax weighted average cost of capital for salalah Mineral water if it is subject to a 40 percent marginal tax rate ? Select one A.11.50  b . None of these C. 1457  d . 1272

Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $3 per share, and the stock currently sells for $50 per share. There are 5,000 shares outstanding. Ignore taxes and other market imperfections (e.g. transaction cost) in answering the questions. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. b) What will be the effect on Ewing’s EPS and PE ratio under the two different scenarios?

Qlink ltd is involved in manufacturing of fast -moving consumer goods.The firm is currently  an all -equity firm with 30 million  shares outstanding and stock price of Kshs.10 per share.The firm  plans to announce  that it will borrow  Ksshs.400 million and use the funds to repurchase shares. The firm will pay interest only on this debt and  has no plans to change its debt holding in future. The prevailing corporate tax rate is 30%.(i)What is the market value of the firm's  existing existing assets before  the announcement?(ii)What  is the market  value of the firm's  assets(including tax shields) just after the debt is issued but before the shares are repurchased?(iii)What is the  firm's  share price just before the share repurchase?However many shares will Qlink  Ltd repurchased?(iv) What are Qlink Ltd's  market value balance sheet and share price after share repurchase?

True/False: Discounting the FCF(Free Cash Flow) of the 100% equity firm with the WACC (Weighted Average Cost Capital)takes the tax shield into account.

In a Modigliani and Miller world with no taxes, a 100% equity financed company has generated £1m cash flows this year.  Consider three alternative policies: 1) pay £1m to shareholders as dividends, 2) buy back £1m worth of shares, 3) retain all cash flows. Determine which of the following statements is correct.     The company's value is higher under policy 1     The company's value is higher under policy 2     Shareholders are indifferent between all three policies      Shareholders are indifferent between policy 1 and policy 2, but prefer both policies to policy 3