Nighthawk Steel, a manufacturer of specialized tools, has $5,220,000 in assets.Temporary current assetsPermanent current assetsCapital assetsTotal assets$1,240,0001,740,0002,240,000$5,220,000Short-term rates are 4 percent. Long-term rates are 6.5 percent. (Note that long-term rates imply a return to any equity). Earbefore interest and taxes are $1,080,000. The tax rate is 25 percent. Assume the term structure of interest rates becomes immwith short-term rates going to 9 percent and long-term rates 4.5 percentage points lower than short-term rates.If long-term financing is perfectly matched (hedged) with long-term asset needs, and the same is true of short-term financing,earnings be after taxes? Eor an example of perfectly hedged plans see Figure 6-8.Earning after taxes$

Earnings after taxes is the amount of net earnings earned by an organization after deducting the…

Answered: Nighthawk Steel, a manufacturer of…

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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The 2021 Income statement for Egyptian Nolse Blasters shows that depreciation expense is $80 million, NOPAT is $239 million. At the end of the year, the balance of gross fixed assets was $650 million. The change in net operating working capital during the year was $70 million. Egyptian's free cash flow for the year was $180 million. Calculate the beginning-of-year balance for gross fixed assets. (Enter your answer in millions of dollars.) Gross fixed assets million
Property, in the form of unimproved land, is purchased at a cost of $8000 and is held for 6 years, at which time it is sold for $32,600. Each during the six years of ownership $220 is paid in property tax and may be accounted for at an interest of 12%. The income tax rate on the longterm capital gain is 15% of the gain. Inflation during the period is 4% per year. What is the annual rate of return for this investment?
Tri-States Gas Producers expects to borrow $800,000 for field engineering improvements. Two methods of debt financing are possible—borrow it all from a bank or issue debenture bonds. The company will pay an effective 8% per year to the bank for 8 years. The principal on the loan will be reduced uniformly over the 8 years, with the remainder of each annual payment going toward interest. The bond issue will be for 800 ten-year bonds of $1000 each that require a 6% per year dividend payment. (a) Which method of financing is cheaper after an effective tax rate of 40% is considered? (b) Which is the cheaper method using a before-tax analysis? Is it the same as the after-tax choice?
See the explanation below to work the problem. XYZ Company, a 'for-profit' business, had revenues of $12 million in 2022. Expenses other than depreciation totaled 75 percent of revenues. XYZ Company, must pay taxes at a rate of 40 percent of pretax (operating) income. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash. Depreciation originally was $1.5 million; however, a change in the depreciation schedule (still within GAAP) has now made the depreciation expense DOUBLE. Based on this change in depreciation expense, what would XYZ's net income now be? Select one or more: a. so b. $3,000,000 c. $1,500,000 Od. Not enough information to tell
Maddux Corporation has an EBIT of $835,000 per year that is expected to continue in perpetuity. The unlevered cost of equity for the company is 16 percent and the corporate tax rate is 21 percent. The company also has a perpetual bond issue outstanding with a market value of $2.1 million. What is the value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) Value of the company
Edwards Electronics recently reported $15,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. How much was its net operating profit after taxes (NOPAT)? Select the correct answer. a. $6,324.00 b. $6,349.50 Oc$6,273.00 O d. $6,298.50 e. $6,375.00
Mansukh
Tool Manufacturing has an expected EBIT of $74,000 in perpetuity and a tax rate of 21 percent. The company has $131,500 in outstanding debt at an interest rate of 6.8 percent and its unlevered cost of capital is 13 percent. What is the value of the company according MM Proposition I with taxes? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Company value
Softek Corporation forms a separate legal entity, Startek, to develop new technology. The entity is funded by $2,000,000 in outside equity and $26,000,000 in debt. Softek guarantees Startek's debt. The entity is expected to generate the following cash flows at the end of two years: Cash Flow Probability $14,520,000 0.50 42,350,000 0.20 60,500,000 0.30 A discount rate of 10 percent is appropriate. Required Assume qualitative analysis of Startek's VIE status is inconclusive. Quantitatively analyze whether Startek is a variable interest entity. Instructions: Use negative signs with your answers, when appropriate. • Enter $ answers in millions ($11,000,000 equals $11 million). • Enter Probability answers using decimals. Expected Present Cash Flow Value Probability Expected Investment Residual Expected Fair Value Returns S PV Gains $ $ Expected Losses
Muffin's Masonry Incorporated's balance sheet lists net fixed assets as $31 million. The fixed assets could currently be sold for $53 million. Muffin's current balance sheet shows current liabilities of $14.0 million and net working capital of $13.0 million. If all the current accounts were liquidated today, the company would receive $8.10 million cash after paying the $14.0 million in current liabilities What is the book value of Muffin's Masonry's assets today and the market value of these assets? Note: Enter your answers in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) Current assets Fixed assets Total BOOK VALUE MARKET VALUE (in millions of dollars) $ 0.00 $ 0.00
Mao Construction recently reported $20.50 million of sales, $12.60 million of operating costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. What was Mao's operating income, or EBIT, in millions? * $4.90 $3.97 $3.57 $4.41 O $3.21
The liabilities and owners’ equity for Campbell Industries is found here. What percentage of the firm’s assets does the firm now finance using debt (liabilities)? If Campbell were to purchase a new warehouse for $1.4 million and finance it entirely with long-term debt, what would be the firm’s new debt ratio?

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