EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 2, Problem 18QP
a.
Summary Introduction
To find out: The market value of firm’s equity
b.
Summary Introduction
To find out: The interest rate revised by catalytic concepts on bonds A.
c.
Summary Introduction
To discuss: Whether the farmer or meat packer sell the cattle.
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Refer to the data for Eccles Inc. earlier. If the effective personal tax rates on debt income and stock income are Td = 25% and TS = 20% respectively, what is the value of the firm according to the Miller model (Based on the same unlevered firm value in the earlier question)?
a. $475,875
b. $536,921
c. $587,750
d. $623,050
O $564,167
Warren Supply Inc. wants to use debt and common equity for its capital budget of $800,000 in the coming year, but it will not issue any new common stock. It is forecasting an EPS of $3.00 on its 500,000 outstanding shares of stock and is committed to maintaining a $2.00 dividend per share. Given these constraints, what percentage of the capital budget must be financed with debt?
a. 33.84%
b. 37.50%
c. 32.15%
d. 30.54%
e. 35.63%
Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
What is the firm's cost of equity according to MM with corporate taxes?
Ο 32.0%
Ο 25.9%
Ο 21.0%
Ο 28.8%
Ο 23.3%
Chapter 2 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 2 - Prob. 1QPCh. 2 - Financial Markets. The stock and bond markets are...Ch. 2 - Financial Markets and Institutions. True or false?...Ch. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Financial Intermediaries. Is an insurance company...Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Liquidity. Securities traded in active financial...
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