J_Fitzgerald_FIN534_WEEK10 ACTIVITY

Question 29: MM and Taxes Tempest Corporation expects an EBIT of $37,700 every year forever. The company currently has no debt and its cost of equity is 11 percent. The tax rate is 22 percent. What is the current value of the company? Suppose the company can borrow at 6 percent. What will the value of the company be if it takes on debt equal to 50 percent of its unlevered value? What if it takes on debt equal to 100 percent of its unlevered value? What will the value of the company be if it takes on debt equal to 50 percent of its levered value? What if the company takes on debt equal to 100 percent of its levered value?

General Accounting Question provide solution

QUESTION 5 Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 11 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Given the above information;   a) Complete the table given below for varying levels of debt below by using a mix of the given information and using your own computations.   EBIT $100,000       Cost of debt 11%       Cost of equity when unlevered 18%       Tax rate 31%       Debt $0 $10,000 $20,000 $30,000 Cost of Equity when levered         Equity         D/E         Vu         VL         WACC               b) Plot the results from the table into the following two graphs: i) Value of the firm vis-à-vis- Total debt ii) Cost of capital of the firm vis-à-vis D/E ratio. iii) Which MM propositions have you demonstrated?

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Question 14  General Electric expects a net income next year of $19.53 million, and a free cash flow of $22.47 million.  The company has a marginal corporate tax rate of 35%. Suppose General Electric increases its leverage, such that the interest expense of the company rises by $2.6 million. How will net income change?  Show your work.       2. For the same increase in interest expense in part (1), how will free cash flow change? Free cash flow will increase by $2.6 million. Free cash flow will increase by less than $2.6 million. Free cash flow will remain the same. Free cash flow will decrease by less than $2.6 million Free cash flow will decrease by $2.6 million

What are its after tax earnings? General accounting question

QUESTION 1 Similarly to the Gilbert Lumber Company case, suppose today is January 1, 2020 and your company, Maschera Corp. has a loan with an APR of 18% whose principal is reduced by $4,000 on the last day of every month. The balance outstanding on this loan on December 31, 2019 (i.e., yesterday) was $389,000. Find the TOTAL amount of interest that Maschera will pay over the next calendar year; that is, over the next 12 months. (Acceptable error = $200) Carefully note that, as stated, the principal payments on the loan occur on the last day of each month. Thus, for example, during the entire month of January, the balance outstanding of the loan is equal to the balance that loan had on December 31.

Answer g

Q A Today is January 1, 2009. The state of Iowa has offered your firm a subsidized loan. It will be in the amount of $10,000,000 at an interest rate of 5 percent and have ANNUAL (amortizing) payments over 3 years. The first payment is due today and your taxes are due January 1 of each year on the previous year's income. The yield to maturity on your firm's existing debt is 8 percent. What is the APV of this subsidized loan? If you rounded in your intermediate steps, the answer may be slightly different from what you got. Choose the closest. Select one: a. −$3,497,224.43 b. $417,201.05 c. $840,797 d. none of the options Full explain this question and text typing work only     We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this line Fast

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Answer d - f

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Answer parts D & E

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Problem 6-7 As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $ 46 million $ 21 million $ 16 million $ 31.0 26 million 30% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $56 million of new debt at an interest rate of 4 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $5.5 million. a. Times interest earned i b. Times burden covered c. Earnings per share d. Times interest earned d. Times burden covered d. Earnings per share c. Calculate next year's earnings per share assuming Adirondack raises the $56 million of new debt. d. Calculate next year's times-interest-earned ratio,…

Abc

Problem 6-7 As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $ 46 million $ 21 million $16 million $ 31.0 26 million 30% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $56 million of new debt at an interest rate of 4 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $5.5 million. c. Calculate next year's earnings per share assuming Adirondack raises the $56 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.1 million new shares at $27 a share instead of raising new debt.. Note:…

QUESTION 3 How much will Kingston Technologies have to pay each year in 8 equal payments, starting 2 years from now, to repay a $900,000 loan. The interest rate is 8% per year? Kingston Technologies will have to pay $ each year to repay the loan. QUESTION 4 Lifetime savings accounts, known as LSAS, allow people to invest after-tax money without being taxed on any of the gains. If an engineer invests $18,000 now and $18,000 each year for the next 12 years, how much will be in the account immediately after the last deposit, provided the account grows by 9% per year? After the last deposit, the balance in the account will be $.

Attempts ܀ 2. An overview of a firm's cost of debt The before-tax cost of debt ▸ Blue Hamster Manufacturing (BHM) can borrow funds at an interest rate of 7.30% for a period of five years. Its marginal federal-plus-state tax rate is 35%. BHM's after-tax cost of debt is (rounded to two decimal places). Keep the Highest/3 O 6.99% O 5.59% At the present time, Blue Hamster Manufacturing (BHM) has a series of twenty-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,181.96 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 35%. If BHM wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? O 6.29% O 8.04% is the interest rate that a firm pays on any new debt financing.