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Assume that Hogan Surgical Instruments Co. has $2,700,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 15 percent, but with a high-liquidity plan, the return will be 11 percent. If the firm goes with a short-term financing plan, the financing costs on the $2,700,000 will be 7 percent, and with a long-term financing plan, the financing costs on the $2,700,000 will be 9 percent. a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. Anticipated return $ 160,000 b. Compute the anticipated return after financing costs with the most conservative asset-financing mix. Anticipated return $ 40,000 c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix. Anticipated Return Low liquidity High liquidity

Assume that Hogan Surgical Instruments Co. has $3,400,000 in assets. If it goes with a low-liquidity plan for the assets, it can earn a return of 17 percent, but with a high-liquidity plan, the return will be 13 percent. If the firm goes with a short-term financing plan, the financing costs on the $3,400,000 will be 9 percent, and with a long-term financing plan, the financing costs on the $3,400,000 will be 11 percent. a. Compute the anticipated return after financing costs with the most aggressive asset-financing mix. Anticipated return b. Compute the anticipated return after financing costs with the most conservative asset-financing mix. Anticipated return c. Compute the anticipated return after financing costs with the two moderate approaches to the asset-financing mix.

The firm earns 5% on current assets and 15% on fixed assets. The firm's current liabilities cost 7% to maintain and the average annual cost of long-term funds is 20 %. Calculate the firm's initial net working capital. Calculate the firm's initial ratio of current assets to total assets. Critically evaluate THREE (3) advantages of commercial paper that usually used by the largest and most credit-worthy companies.

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es Speedy Delivery Systems can buy a piece of equipment that is anticipated to provide an 11 percent return and can be financed at 6 percent with debt. Later in the year, the firm turns down an opportunity to buy a new machine that would yield a 9 percent return but would cost 15 percent to finance through common equity. Assume debt and common equity each represents 50 percent of the firm's capital structure. a. Compute the weighted average cost of capital. Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Weighted average cost of capital % b. Which project(s) should be accepted? Piece of equipment New machine

The following information is available for Multicomm Limited : Asset/Sales is 0.9, change in sales is Rs.50 million, Liability/Sales is 0.60, Net Profit Margin is 7 percent, S1=Rs.250 million and retention ratio = 0.8. How much fund will the firm be able to generate internally for the forthcoming year a. 14 million b. 0.8 million c. 1.5 million d. 1 million

Give typing answer with explanation and conclusion SeattleHealth Plans currently uses zero-debt financing. Its operating profit is $1 million, and it pays taxes at a 23 percent rate. It has $8 million in assets and, because it is all-equity financed, $8 million in equity. Suppose the firm is considering replacing 22 percent of its equity financing with debt financing that bears an interest rate of 5 percent.   What impact would the new capital structure have on the firm's profit?

Suppose that Seattle Health Plans use zero-debt financing. It's operating profit is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all equity financed, $5 million equity. The firm's profit, total dollar return to investors, and return on equity under these conditions are listed below. Suppose that the firm is considering replacing half of its equity financing with debt financing that bears an interest rate of 8 percent  A) What impact would the new capital structure have on the firm's profit, total dollar return to investors, and return on equity? B) Redo the analysis, but now assume that the debt financing would cost 15 percent. C) Repeat the analysis required for question A, but now assume that Seattle Health Plans is a not-for-profit corporation and hence pays no taxes. Balance Sheets        Total Assets  $5,000,000 Debt $0 Common stock (=equity) $5,000,000 Total liabilities & equity  $5,000,000     Income…

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) You are asked to estimate the RAROC of a bank's $100 million loan business, 7.5% of which is the economic capital. The average interest rate is 8%. All the loans have the same default probability of 1.5% with a loss given default of 60%. Operating costs are $15 million, and the funding cost of the business is $30 million. The economic capital is invested and earns 6%.

Kohwe Corporation plans to issue equity to raise $50.7 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10.4 million each year. Kohwe's only asset is this investment opportunity. Suppose the appropriate discount rate for Kohwe's future free cash flows is 7.7%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is the value of Kohwe if it finances the investment with equity? a. What is the NPV of Kohwe's investment? The NPV of Kohwe's investment is $ million. (Round to two decimal places.) b. What is the value of Kohwe if it finances the investment with equity? The Kohwe finances stment with equity $ million. (Round decimal places.)

You are given the following information concerning a firm: (please show work) Assets required for operation: $5,000,000 Revenues: $8,400,000 Operating expenses: $7,900,000 Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate 60% debt financing with a 6% interest rate a) What is the net income for each combination of debt and equity financing? b) What is the return on equity for each combination of debt and equity financing? c) If the interest rate had been 12 percent instead of 6 percent, what would be the return on equity for each combination of debt and equity financing?

Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $620,000. 1. Compute Montclair’s (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $500,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky?

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Montclair Company is considering a project that will require a $520,000 loan. It presently has total liabilities of $210,000 and total assets of $630,000. 1. Compute Montclair's (a) current debt-to-equity ratio and (b) the debt-to-equity ratio assuming it borrows $520,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky? 1. (a) 1. (b) 2. 1 Choose Denominator: 1 1 1 If Montclair borrows the funds, does its financing structure become more or less risky? Choose Numerator: Debt-to-Equity Ratio

Seattle Health Plans currently uses zero-debt financing. Its operating profit is $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and, because it is all-equity financed, $5 million in equity. Suppose the firm is considering replacing half of its equity financing with debt financing that bears an interest rate of 8 percent. What impact would the new capital structure have on the firm’s profit, total dollar return to investors, and return on equity? Redo the analysis, but now assume that the debt financing would cost 15 percent. Repeat the analysis required for part a, but now assume that Seattle Health Plans is a not-for-profit corporation and hence pays no taxes. Compare the results with those obtained in part a

Show the complete solution and explanation. Thank you. 1. A company with cost of capital of 15% plans to finance an investment with debt that bears 10% interest. The rate it should use to discount the cash flows is

Establish a finance plan that assumes the sales estimates at the take price level would have been increased by $500,000. This means that the current take price level of $9,170,000 would increase by $500,000. This change would offer more collateral to the bank, and the bank would then increase the GAP loan. The GAP loan requires 200% collateral in unsold rights. This change would impact the equity investment.   Question:   What would be the new equity investment be if the budget stays the same?

Herriman Solutions needs $14.4 million to build a new assembly line. The company's target debt-equity ratio is 1.08. The flotation cost for new equity is 10.2 percent, but the floatation cost for debt is only 5.7 percent. The company has sufficient resources to finance the equity portion of the assembly line internally. What is the true cost of building the new assembly line after taking flotation costs into account? Total initial cost = $ Allowed aftemots 3 Item Item Item Item Show

Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 10 percent (refer to image):  a.) According to the net present value method of capital budgeting, whichinvestment(s) should the firm make? b.) According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? c.) If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Doesthis information alter your conclusions concerning investing in Q and S? To answer, assume that S’s cash flows can be reinvested at its internal rate of return. Would your answer be different if S’s cash flows were reinvested at the cost of capital (10 percent)?

Panelli's is analyzing a project with an initial cost of $139,000 and cash inflows of $74,000 in Year 1 and S86.000 in Year 2. This project is an extension of current operations and thus is equally as risky as the current company. The company uses only debt and common stock to finance its operations and maintains a debt-equity ratio of .39. The aftertax cost of debt is 5.1 percent, the cost of equity is 13.2 percent, and the tax rate is 21 percent. What is the projected net present value of this project? -$2,399 $938 O-$1,807 O $1,109

A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive, and the firm’s cost of capital is 8 percent. a.) If the firm’s cost of capital had been 10 percent, what would be investment A’s internal rate of return? b.) The payback method of capital budgeting selects which investment?Why?

You are given the following information concerning a firm:Assets required for operation: $5,100,000Revenues: $8,400,000Operating expenses: $7,850,000Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 8% interest rate 60% debt financing with a 8% interest rate   What is the net income for each combination of debt and equity financing? Round your answers to the nearest dollar.     1 2 3 Net income $     $     $       What is the return on equity for each combination of debt and equity financing? Round your answers to one decimal place.     1 2 3 Return on equity   %     %     %     If the interest rate had been 16 percent instead of 8 percent, what would be the return on equity for each combination of debt and equity financing? Round your answers to one decimal place.     1 2 3 Return on equity   %     %     %     What is the implication of the use of financial leverage…

Axon Industries needs to raise $22.41M for a new investment project. If the firm issues one-year debt, it may haveto pay an interest rate of 9.44 %, although Axon's managers believe that 5.51 % would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 11.26 %. What is the cost to current shareholders of financing the project out of Equity?   NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.0000, etc.

Antonio's is analyzing a project with an initial cost of $39,000 and cash inflows of $25,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.8. The pre-tax cost of debt is 7.8 percent and the cost of equity is 11.4 percent. The tax rate is 34 percent. What is the projected net present value of this project? Multiple Choice $3.435.10 $5,204.70