The firm’s target capital structure calls for 50% debt financing, the interest rate required on the business’s new debt is 10% and its tax rate of 40%. 1- Calculate Medical Associates’ cost of equity estimate using the DCF method. The cost of equity is the rate of return that investors require on the firm’s common stock. Earnings can be paid in the form of dividends or retained for reinvestment in the business. The discounted cash flow (DCF) model E(Re)= D0 x [1 + E(g)] + E(g) = E(D1)/Po + E(g) D0 is $2 x 1+7%= $2 x 1.07 = $2.14 Current Stock price is $23 (Po) R(Re)= E(D1)/P0 + E(g) =2.14/23 + 7%= 16.30% 2- Calculate the cost of equity estimate using CAPM R(Re)= RF + [R(Rm)- RF] x b = RF + (RPm x b) = 9% + (13% - 9% ) x 1.6 = 9% + (4% x 1.6) = 9% + 6.4%= 15.40% 3- On the basis of your answers to #1 & #2, what is the final estimate of the firm’s cost of equity.
When son was old enough his dad bought him a Cadillac for his first car in 1921. That same year 4 days later he got into an accident and dad pays for all repairs. Son has just graduated and makes it into Stanford University. The dad
DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt ratio = 1 – (1 / Equity multiplier) Debt ratio = 1 – (1/2.5) = 1 - .40 = .60 Debt ratio = 60% (3-3) Market/Book Ratio: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets.
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.
| | | | | * Question 6 0 out of 2 points | | | Examine the graph below. The government has placed a $200 tariff on Product z. The new equilibrium price is $600. How much tax revenue will be collected? | | | | | Selected Answer: | $10,000 | | | | | * Question 7 2 out of 2 points | | | Examine the graph below.
What does the $2.55 billion increase in Berkshire Hathaway’s market value represent? 2. Choice of valuation methods: What do you think PacifiCorp is worth on its own before its acquisition by Berkshire? Which valuation method should you use to value PacifiCorp and why? Show clearly the steps to arrive at the following estimates in Exhibit 10: Enterprise Value as Multiple of: Revenue EBIT EBITDA Net Income 6,252 8,775 9,023 7,596 6,584 9,289 9,076 7,553 MV Equity as Multiple of: EPS Book Value 4,277 5,904 4,308 5,678 Median Mean If you need to use a discount rate to discount cash flows then an appropriate discount rate estimate for PacifiCorp is approximately 9%.
He was a stockbroker at one point, but fell victim to the economy and lost his job December 9, 2008. The mother is 51 and a breast cancer survivor that works two jobs to support her family. One of the jobs as a receptionist in a hair salon and the other in a local college campus office. Both parents have a high school diploma. The son recently graduated from Albany college with a degree in communications.
What is the amount of its credit carryover and the last year to which the carryover could be used? Answer: $7,750 carried over to 2004 or 2025 4. Margolin Corporation has a regular taxable income of $120,000. It has a positive adjustment of $90,000, preference items of $50,000 and negative adjustments of $40,000. What is its alternative minimum tax?
Select the correct answer. $199,990 | | | $755,322 | | | $955,312 | | | $139,358 | | 8. Variable costs as a percentage of sales for Leamon Inc. are 61%, current sales are $517,801. and fixed costs are $197,934. How much will operating income change if sales increase by $41,139?
The tax rate is 40 percent. a. what is the initial investment outlay? b. The company spent and expensed $50,000 on research related to the project last year. Would this change your answer?