Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Economy Probability Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O-26.37% Cash flow in the next year Amount $110 million $101 million $61 million O-16.63% O 64.8%
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- The table below shows the forecast cash flow information of Good Time Inc. for the nextyear. The required debt payment in the next year is $88 million, with a current market valueof $60 million. The company pays no tax. If you invest in the corporate debt of Good TimeInc. today, what is your expected return on this investment?Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 millionHappy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 million
- The table below shows the forecast cash flow information of Good Time Inc. for the nextyear. The required debt payment in the next year is $88 million, with a current market valueof $60 million. The company pays no tax. If you invest in the corporate debt of Good TimeInc. today, what is your expected return on this investment? hand write pleaseThe table below shows the forecast cash flow information of Good Time Inc. for the next year. The required debt payment in the next year is $88 million, with the current market value of $75 million. The company pays no tax. If you invest in the corporate debt of Good Time Inc. today, what is your expected return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.6 $148 million Recession 0.4 I$61 million O 18.77% O 10.29% O 2.93% O 28.67%We are predicting for the end of this fiscal year: Skunk Products' EBIT is $1000, its tax rate is 35%, depreciation is $100, capital expenditures are $200, accounts receivable increase by $100, and accounts payable decrease by $100. What is the free cash flow to the firm? The FCFF will grow at 3%, WACC is 10%. What is the value of the company's assets? FCFF1 = $
- A firm will earn a taxable net return of $500 million next year. If it took on debt today, it would have to pay creditors\varepsilon(rDebt) = 5% + 10% x wDebt2. Thus, if the firm has 100% debt, the financial markets would demand 15% expected rate of return. Further, assume that the financial markets will lend the firm capital at this overall net cost of 15%, regardless of how the firm is financed. The firm is in the 25% marginal tax bracket. 1. If the firmis fully equity-financed, what is its value? 2. Using APV, if the firm is financed with equal amounts of debt and equity today, what is its value? 3. Using WACC, if the firm is financed with equal amounts of debt and equity today, what is its value? 4. Does this firm have an optimal capital structure? If so, what is its APV and WACC?Your company doesn't face any taxes and has $755 million in assets, currently financed entirely with equity. Equity is worth $50.50 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Recession Average Boom Probability of State .20 .60 .20 Expect EBIT in State $105 million $180 million $240 million The firm is considering switching to a 20-percent debt capital structure, and has determined that they would have to pay a 10 percent yield on perpetual debt in either event. What will be the standard deviation in EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places except calculation of number of shares which should be rounded to nearest whole number.)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.)
- Mexican Motor's market cap is 200 billion pesos. Next year's cash flow is 8.6 billion pesos. Security analyst are forecasting that free cash flow will grow by 7.60% per year for the next five years. a. Assume that the 7.60 growth rate is expected to continue forever. What rate of return are investors expecting? b1. Mexican Motors has generally earned about 10% on book equity (ROE= 10%) and reinvested 50% of earnings. The remaining 50% of earnings has gone to free cash flow. Suppose the company mantians the same ROE and investment rate for the long run. What will be the growth rate of earnings? b2. What would be he rate of return?Suppose SBD Bank has RSA of $150m and RSL of $140m. If interest rates rise by 1 percent on both RSAs and RSLs, what would be the expected annual change in net interest income (ΔNII) based on $GAP? Show your work. ( How a commercial bank’s value would be affected by an increase in economic growth?Your company faces a 30% tax rate and has $264 million in assets, currently financed entirely with equity. Equity is worth $9.40 per share, and a book value of equity is equal to the market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Pessimistic Optimistic Probability of State .30 .70 Expect EBIT in State $11.4 million $51.4 million The firm is considering switching to a 25-percent debt capital structure, and has determined that they would have to pay a 11 percent yield on perpetual debt in either event. What will be the level of expected EPS if they switch to the proposed capital structure? (Round your intermediate calculations and final answer to 2 decimal places, except calculation of number of shares which should be rounded to nearest whole number.)