The parent receives annual dividends from the subsidiary of $2,500,000. If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%, what is the effective tax rate on the intercompany dividends, and how much net dividends are received? Question 20 New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14% coupon, 30-year bond issue that was issued 5 years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market.
The discount rate used to calculate the present value of the project is Sampa Video’s cost of equity capital. We can use the CAPM model to calculate the rate, which is (5%+1.5*7.2%). Then we get the rate of 15.8% as the discount rate used to calculate the PV of the Free Cash Flows from 2002 to 2006. The material said that after 2006 FCF would grow at 5% long term rate. We estimated the terminal value of the company using the Gordon Growth Model, which comes the result of $4,812,500.
Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX. However, they won’t need to post a margin at the beginning of the contract. The use of a monthly average price a net would be an advantage to J&L. 3. Using the estimate of 4.5 million gallons per month, how would you construct a futures hedge for the next 12 months?
The bonds sell at a price of $850. What is their yield to maturity? Given: TTM = 12 years Par = $1,000 n = 12 PMT = 100 PV = -850 i = 12.4751% C = 10% ($100) Price = $850 PMT = 100 Yield to Maturity = 12.48% 5-6 Maturity Risk Premiums The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.3%. What is the maturity risk premium for the 2-year security?
To forecast 2010 sales based on 2009 sales, Equation 1 must be used: St = $500,000 + $1.10St–1 S2010 = $500,000 + $1.10($1,500,000) = $2,150,000 3. Equation 2 requires a forecast of gross domestic product. Equation 3 uses the actual gross domestic product for the past year and, therefore, is observable. 4. Advantages: Using the highest R2, the lowest
What is Patti’s holding period of her partnership interest? The holding period is 3 years that is the same as equipment that is in the hands of the partner. The holding period starts the day after the taxpayer acquires the property and includes the day which property is sold. C. What is the basis of the equipment in the hands of the partnership? $45,000.
Question: : (TCO D) A company issues $5,000,000, 7.8/%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on December 31. The proceeds from the bonds are $4,901,036. Using effective-interest amortization, how much interest expense will be recognized in 2010? 15.
What assumptions can you use to arrive approximately at the share price of $273,000 that was estimated by the dissenting shareholders? Show how these assumptions impact your valuation. 4. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000? Assume that (i) if the trial proceeds it is expected to last less than a month and result in two possible outcomes in terms of the price per share established in court: the $273,000 claimed by the plaintiffs, or the $55,400 being defended by Herbert Kohler; (ii) Kohler estimates the probabilities of these outcomes at 30% and 70%, respectively.
Suppose that instead of making a cash offer as in Q8, Velcro Saddles considers offering Pogo shareholders stocks in Velcro Saddles. Shares outstanding for both companies are 1 million. (LO2) a. How much is the price ratio between Velcro and Pogo? (Hints: Slide #17.)
Expected Return The Buckle (BKE) recently paid a $0.90 dividend. The dividend is expected to grow at a 19 percent rate. At the current stock price of $43.17, what is the return shareholders are expecting? C. 21.48% i = D1/P0 + g = D0(1 + g)/P0 + g = .90(1+.19)/43.17 + .19 = .2148 8. This is the interest rate that would exist on a default free security if no inflation were expected.