Dan Corp. has a degree of financial leverage of 2. Third Corp. will experience a 75% increase in earnings per share, and it will have earnings before interest and taxes of P120,000 if sales increase by 30%. Determine the degree of operating leverage of the Dan Corp.? A. 1.25 B. 1.00 C. 1.20 D. 1.40
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- Assume Hayworth corp. has an operating leverage of 5.39 and a financial leverage of 1.53. How much would the EPS of Hayworth corp. increase if sales increased by 0.23? Instruction: Round to three decimal placesAssume there are two firms with a MV of $50,000,000. Firm A consists of 10% debt and 90% equity. Firm B consists of 40% debt and 60% equity. Assume perfect capital markets and M&M Proposition 2 holds. Which firm will have a higher expected return for equity holders? Why? For the toolhar prace ALT+F10/PC or ALT+FN+F10 (Mac).Ch 18) Suppose Alcatel-Lucent has an equity cost of capital of 10.1%, market capitalization of $11.52 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 5.7% and its marginal tax rate is 33% a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is 8.34 % (Round to two decimal places.) b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, The NPV of the project is $87.51 million. (Round to two decimal places.) c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? The debt capacity of the…
- As an Analyst you were tasked to compute for the Weighted Average Cost of Capital of variouscompanies given the following information. Income tax rate is 25% a. What is the cost of equity of each companies?b. What is the after tax cost of debt of each companies?c. What is the WACC of each companies? W Corp A Corp Co. Corp Ca Corp Risk Free rate 4.00% 3.00% 2.00% 3.50% Beta 1.25 % 1.50% 1.30% 1.40% Market Return 12.00% 11.00 % 10:00% 8:00% Debt to Equity Ratio 2.5 3 4 3.5 Credit Spread om BPS 200 300 250 15048. You have calculated Ford Motor's degree of financial leverage as 1.5. This is based on computations involving a net income before taxes and interest of P150,000. Ford Motor is subject to a tax rate of 30%, and a net margin ratio of 10%. If operating income increases by 5%, how much will earnings to shareholders increase by? a. 5% b. 3.33% c. 7.5% d. 1.5% 5 a n 11 inA firm has a profit margin of 15 percent on sales of GHS20,000,000. If the firm has debt of GHS7,500,000, total assets of GHS22,500,000, and an after-tax interest cost on total debt of 5 percent, what is the firm?s ROA? O A. 8.4% B. 10.9% O C. 12.0% D. 13.3% E. 15.1%
- Degree of operating leverage of 1.5 means: a. If sales rise by 1%, EBIT will rise by 1.5% b. If sales rise by 1%, EBIT will remain unaffected c. If EBIT increase by 1%, the EPS will increase by 1 % d. If sales increase by 1.5%, the EBIT will increase by 1%Plz Use excel !!! and show formula A company currently has a WACC of 10.6 percent and no debt. The tax rate is 21 percent. a. What is the company’s current cost of equity? b. If the firm converts to 40 percent debt with a cost of 6%, what will its cost of equity be? And the WACC? c. If the firm converts to 60 percent debt with a cost of 6% , what will its cost of equity be? And the WACC? d. What can you conclude from the values of the cost of equity and WACC obtained in b. and c.Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95 billion, and an enterprise value of $15 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.9% and its marginal tax rate is 38%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here,? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 FCF ($ million) - 100 50 Print C Done 2 99 3 66 X
- Suppose Alcatel-Lucent has an equity cost of capital of 10.4%, market capitalization of $11.52 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.6% and its marginal tax rate is 34%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, ? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is 9.34 %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 FCF ($ million) 45 Print 0 - 100 Done 2 101 3 66 - XJohnston Company has a 7% cost of debt, a 50% debt-value (D/V) ratio, and a 15% cost of equity. The marginal tax rate is 25%. What would be Johnston's WACC if it were 100% equity financed? Assume continuous leverage rebalancing. a.11.00% b.10.13% c. 15.00% d.7.50%Problem 1 Assume that ABC Corporation earns a net income of 10 million for the current period. The corporation also needs Br 8 million for new investments for the next period. Suppose the target capital structure of debt to equity ratio is one to three ratios. Based on this, determine the amount of dividend to be paid based on the residual dividend policy? Beob om
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