Saturn Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would the company need in order to achieve the 15% ROE, holding everything else constant?
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- Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $550,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant? Do not round your intermediate calculations. a. 10.13% b. 10.64% c. 10.23% d. 8.59% e. 9.92%Sunland Inc.’s common shares currently sell for $35 each. The firm’s management believes that its shares should really sell for $42 each. The firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 5 percent per year forever (and this is common knowledge to the market). - What does management believe is the correct cost of common equity for the firm?Burger Corp has $500,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $600,000, and its net income after taxes was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would Burger need in order to achieve the 15% ROE, holding everything else constant?
- LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant? a. 7.57% b. 7.95% c. 8.35% d. 8.76% e. 9.20%As a consultant to First Responder Inc., you have obtained the following data (dollars in millions). The company plans to pay out all of its earnings as dividends, hence g = 0. Also, no net new investment in operating capital is needed because growth is zero. The CFO believes that a move from zero debt to 80.0% debt would cause the cost of equity to increase from 10.0% to 14.0%, and the interest rate on the new debt would be 9.0%. What would the firm's total market value be if it makes this change? Hints: Find the FCF, which is equal to NOPAT = EBIT(1 - T) because no new operating capital is needed, and then divide by (WACC - g). Do not round your intermediate calculations. Oper. income (EBIT) $800 Tax rate 25.0% New cost of equity (rs) 14.00% New wd 80.0% Interest rate (rd) 9.00% $5,854 $4,917 $6,205 $7,317 $5,561I want to correct answer accounting questions
- 13. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?Sunland Inc.’s common shares currently sell for $35 each. The firm’s management believes that its shares should really sell for $42 each. The firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 5 percent per year forever (and this is common knowledge to the market). - What is the current cost of common equity for the firm?Currently, Dividend Airlines is an unlevered firm and expects to generate $330 free cash flow each year in perpetuity. Its corporate tax rate is 37%. The firm is considering a capital structure to allow $361 of debt. The debt is assumed to be rolled over when it matures with the same amount of principal. Its cost of debt capital is 15%. Similar unlevered firms in the same industry have a cost of equity capital of 28%. Assume no agency costs nor default risk. What will the value of Dividend Airlines be after the change of capital structure?
- An unlevered firm has expected earnings of $2,401 and a market value of equity of $19,600. The firm is planning to issue $4,000 of debt at 6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?Use the following information for questions 17 and 18: Powell Plastics, Inc. (PP) currently has zero debt. Its free cash flow last year was $48,000, and it is a zero growth company. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. PP is considering moving to a capital structure that is comprised of 30% debt and 70% equity. The debt would have an interest rate of 8%. The new funds would be used to repurchase stock. It is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. If this plan were carried out, what would be PP's new value of operations? O $487,805 $505,524 O $525,173 O $734,634 O $813,008Tijuana Brass Instruments Company treats dividends as a residual decision. It expects to generate $2 million in net earnings after taxes in the coming year. The company has an all-equity capital structure, and its cost of equity capital is 15 percent. The company treats this cost as the opportunity cost of “internal” equity financing (retained earnings). Because of flotation costs and underpricing, “external” equity financing (new common stock) is not relied on until internal equity financing is exhausted. How much in dividends should be paid if it has $3 million in projects whose expected returns exceed 16 percent?