40. The financial manager of a company has formulated variousfinancial plans to finance Rs. 30,00,000required to implement various capital budgeting projects. You are required to determinethe indifference point for each financial plan, assuming 55% corporate tax rate and the face value of equity shares as Rs.100 the option are (i) equity capital of Rs 30,000 00 or Rs. 1500000 10 % debentures and Rs. 15,00,000 equity . (ii) Equity capital of Rs.30,00,000 or 12% preference shares of Rs 10,00,000 and Rs.20,00,000 equity. (iii) Equity capital of Rs. 30,00,000 or 12% preference 10,00,000 Rs. 10,00,000 (10%) debentures and Rs. 10,00,000 equity and (iv) equity share capital of Rs. 20,00,000 and 10 debentures of Rs. 10,00,000 or 12 % preference capital of Rs. 10,00,000 10% debentures of Rs. 8,00,000 and Rs. 12,00,000 equity. capitalof Rs.

40. The financial manager of a company has formulated variousfinancial plans to finance Rs. 30,00,000required to implement various capital budgeting projects. You are required to determinethe indifference point for each financial plan, assuming 55% corporate tax rate and the face value of equity shares as Rs.100 the option are (i) equity capital of Rs 30,000 00 or Rs. 1500000 10 % debentures and Rs. 15,00,000 equity . (ii) Equity capital of Rs.30,00,000 or 12% preference shares of Rs 10,00,000 and Rs.20,00,000 equity. (iii) Equity capital of Rs. 30,00,000 or 12% preference 10,00,000 Rs. 10,00,000 (10%) debentures and Rs. 10,00,000 equity and (iv) equity share capital of Rs. 20,00,000 and 10 debentures of Rs. 10,00,000 or 12 % preference capital of Rs. 10,00,000 10% debentures of Rs. 8,00,000 and Rs. 12,00,000 equity. capitalof Rs.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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…
The projected capital budget of Kandell Corporation is $575,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $575,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out? Select the correct answer. a. $344,887 b. $345,000 c. $344,831 d. $344,944 e. $344,774
Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two different capital structures under consideration to fund a new project. Assume the company’s tax rate is 30%. Component Scenario 1 Scenario 2 Cost of Capital Tax Rate Debt $5,000,000.00 $2,000,000.00 8% 30% Preferred Stock 1,200,000.00 2,200,000.00 10% Common Stock 1,800,000.00 3,800,000.00 13% Total $8,000,000.00 $8,000,000.00 i need help answering this question
The asset of a firm is financed by $100,000 Common Equity, $100,000 Preferred Stock, and $300,000 Bonds. The Weighted Average Cost of Capital (WACC) is 10%. Given that the asset is likely to generate Net Operating Profit After Tax of $100,000. What would be the firm’s EVA? Question 5 options: 1) $5,000 2) $50,000 3) $20,000 4) None of the above.
Adamson Corporation is considering four average-risk projects with the following costs and rates of return: Project Cost Expected Rate of Return 1 $2,000 16.00% 2 3 4 3,000 5,000 2,000 15.00 13.75 12.50 The company estimates that it can issue debt at a rate of rd = 9%, and its tax rate is 25%. It can issue preferred stock that pays a constant dividend of $4.00 per year at $56.00 per share. Also, its common stock currently sells for $49.00 per share; the next expected dividend, D₁, is $5.75; and the dividend is expected to grow at a constant rate of 5% per year. The target capital structure consists of 75% common stock, 15% debt, and 10% preferred stock. a. What is the cost of each of the capital components? Do not round intermediate calculations. Round your answers to two decimal places. % Cost of debt: Cost of preferred stock: Cost of retained earnings: % % b. What is Adamson's WACC? Do not round intermediate calculations. Round your answer to two decimal places. % c. Only projects…
Please solve the problem max in 30-60 minutes thank u 4. For its investment plan, Padlock Company requires funds, all of which will be financed with ordinary shares that have a nominal value of IDR 10,000. Currently, the company distributes dividends for the shares amounting to IDR 2000 and is expected to grow at a constant rate of 5%. If the current market price of the stock is IDR 8000, what is the cost of equity for the stock?
FIN Fund has $1,850 million dollars of assets, $250 million of liabilities, and the management team will receive $50 million in salary and administrative fees in the coming year. If FIN Fund has 250,000,000 shares outstanding what is the NAV of its shares? O A. $6.00 O B. $6.40 O C. $5.80 D. $7.40 OE. $6.20
Peter Johnson, the CFO of Homer Industries, Inc is trying to determine the Weighted Cost of Capital (WACC) based on two different capital structures under consideration to fund a new project. Assume the company’s tax rate is 30%. Component Scenario 1 Scenario 2 Cost of Capital Tax Rate Debt $5,000,000.00 $2,000,000.00 8% 30% Preferred Stock 1,200,000.00 2,200,000.00 10% Common Stock 1,800,000.00 3,800,000.00 13% Total $8,000,000.00 $8,000,000.00 1-a. Complete the table below to determine the WACC for each of the two capital structure scenarios. (Enter your answer as a whole percentage rounded to 2 decimal places (e.g. .3555 should be entered as 35.55).) Scenario 1 weight % Scenario 2 weight % Scenario1 weighted cost Scenario 2 weighted cost cost of capital tax rate Dept ? ? ? ? 8% 30% Preferred stock ? ? ? ? 10% Common stock ? ? ? ? 13% Total ? ? ? ? 1-b. Which capital structure shall Mr. Johnson choose to fund the new project?…

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