a coupon rate of 8 percent. The tax rate is 34 percent. What is the present value of the tax shield? A. B. C. D. E. $2,823 $2,887 $4,080 $4,500 $4,633
Q: Welling Inc. has a target debt-equity ratio of 0.79. Its WACC is 9.3%, and the tax rate is 35%. a.…
A: WACC means Weighted average cost of capital.WACC = (kd*wd)+(ke*we)wherekd= after tax cost of debtke=…
Q: What is the modified internal rate of return for the following cashflow? CFO CF₁ H ($7,600,000)…
A: MIRR stands for modified internal rate of return. It is an important capital budgeting metric. MIRR…
Q: What are the portfolio weights for a portfolio that has 195 shares of stock A that sell for $96 per…
A: Portfolio weights refer to the proportional composition of the constituents, it is computed by…
Q: A single bank is considering two options: First, it can make a $200,000 mortgage loan for a customer…
A: Let's calculate the weighted risk for each type of loan and then determine the overall expected…
Q: Atlantis Fisheries issues zero coupon bonds on the market at a price of $627 per bond. Each bond has…
A: A bond refers to an instrument that provides the issuer with access to debt capital from…
Q: Stock prices and intrinsic values Benjamin Graham, the father of value investing, once said, “In the…
A: VALUE OF STOCK FORMULA:where.r= return of equityg= growth rate
Q: You are considering the purchase of a $54,000 Ford F-150 Raptor. If you are financing the truck for…
A: A loan refers to a contract between a lender and a borrower where money is forwarded by the lender…
Q: Agnes is 40 years old. She wants to know how much she should be saving each year for retirement.…
A: Future value refers to worth of the investment that is accumulated throughout the investment horizon…
Q: The firm is forecasting its retained earnings equal to $300,000 in the coming year. Once retained…
A: When a company needs funds, it can either use its required profits(internal funding) or raise…
Q: Jaspreet received a 15 year loan of $300,000 to purchase a house. The interest rate on the loan was…
A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount…
Q: FinCorp's free cash flow to the firm is reported as $235 million. The firm's interest expense is $28…
A: The Cost of equity is the total return required on investment by an equity shareholder or required…
Q: An investor is considering the purchase of an existing suburban office building approximately five…
A: Reproduction cost$5,000,000.00Repairable physical depreciation$342,000.00Repairable functional…
Q: A project requires an initial investment of $61.32 million to buy new equipment, and will provide…
A: IRR is the required rate of return for the project to have zero Net Present value.IRR can be…
Q: After a 4-for- 1 stock split, Perry Enterprises paid a dividend of $0.90 per cew share, which…
A: After splitting the stock the dividend paid will be divided among the total number of split stocks…
Q: You are evaluating two different machines. Machine A costs $10,000, has a five-year life, and has an…
A: Equivalent annual cost (EAC) is a financial method employed to compare the annualized costs of…
Q: An owner of the ATRIUM Tower Office Building is currently negotiating a five-year lease with ACME…
A: Base rent: $11 PSFStep-up: $1 PSF per year, starting from year 2Lease term: 5 yearsDiscount rate:…
Q: Exercise 12-3 (Algo) Internal Rate of Return [LO12-3] Wendell's Donut Shoppe is investigating the…
A: Investment requirement$52,000.00Salvage value$16,835.00Annual cost saving$6,900.00Contribution…
Q: Use the following cash flow data to calculate the project's MIRR: WACC: Year Cash flows Select one:…
A: > Given :.> WACC = 10%> Tax rate = 35%
Q: ) The market value of fund assets is $100,000 and the projected value of liabilities is 200,000. The…
A: The implementation of techniques by individuals, corporations, or financial institutions to offset…
Q: At times firms will need to decide if they want to continue to use their current equipment or…
A: The net present value is the difference between the present value of future cash flows and the…
Q: The Bandon Pine Corporation's purchases from suppliers in a quarter are equal to 80 percent of the…
A: The transactions for which cash is paid out by the company are known as cash outlay. For example, it…
Q: PE fund Red Llama buys a company (with no existing debt or cash) for $500 million, at a purchase…
A: Earnings before interest tax depreciation and amortization commonly referred to as EBITDA is the…
Q: OwenInc has a current stock price of $14.30 and is expected to pay a $0.70 dividend in one year. If…
A: We need to use equation below to calculate stock price after 1 year.P1 = P0(1+r) -D1P0 = current…
Q: Which is NOT a factor of a credit score? O Credit History Length O Debt Burden Payment History Asset…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: What is the Delta of this option
A: To calculate the delta of a call option we can use the formula;call option delta == e(rt)*N(d 1)e =…
Q: The company is considering a project involving the purchase of new equipment. Cost of equipment…
A: Net present value (NPV) refers to the capital budgeting technique that uses time value of money to…
Q: 1.The risk-free rate of return is 2.6 percent and the market risk premium is 10 percent. What is the…
A: We need to find out the expected return of the stock by using Capital Asset Pricing Model (CAPM).…
Q: pay $21,600 to the Laramie Fund, which has an NAV of $18 per share at the beginning of the The fund…
A: Smallest units of mutual funds that are shared in the market and NAV are traded in the market like…
Q: 137. A life insurance company invests two million in a 10-year zero-coupon bond and four million in…
A: A zero coupon bond represents a unique type of fixed-income security characterized by distinct…
Q: A property sold for $4.9 million, which equated to a 6.95% cap rate on the estimated first year NOI.…
A: In this question, we are required to determine the expected NOI.
Q: A sum of money invested at 3% per 6-month period, will triple in amount in approximately how many…
A: Here,Lets Assume Present Value of Investment is $1Required Amount is $3Semi Annual Interest Rate is…
Q: Project L requires an initial outlay at t= 0 of $61,215, its expected cash inflows are $11,000 per…
A: IRR refers to the internal rate of return.It is an important tool in capital budgeting. IRR is the…
Q: 5. You've observed the following returns on Crash-n-Burn Computer's stock over the past five years:…
A: Returns 6-8291616
Q: payback period?
A: Payback period alludes to the amount of time it takes to reach the cost of an investment. In simple…
Q: Currently, you have $30,000 that you would like to grow to $97,000 within the next 6 years. Assuming…
A: The concept of TVM refers to the interest-earning capacity of money which makes money earned earlier…
Q: ! Required information [The following information applies to the questions displayed below.] A…
A: In this question, we are required to determine the quality of income ratio.
Q: 8. Analysis of a replacement project At times firms will need to decide if they want to continue to…
A: Cost of new equipment$6,00,000Estimated life 6New equipment depreciation$1,00,000Old equipment…
Q: A new project will have an intial cost of $15,000. Cash flows from the project are expected to be…
A: NPV (Net Present Value) is a financial metric used to evaluate the profitability of an investment by…
Q: An asset costs $840,000 and will be depreciated in a straight-line manner over its five- year life.…
A: Here, Cost of Asset $ 840,000.00Life of Asset in years5Annual Depreciation $…
Q: You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner…
A: Net advantage to leasing(NAL) stands as a pivotal financial metric utilized to gauge the competitive…
Q: Assume the total cost of a university education will be $90,000 when your child enters university in…
A: Compound = Monthly = 12Future Value = fv = $90,000Time = t = 6 * 12 = 72Present Value = pv = $55,000
Q: Charlene is evaluating a capital budgeting project that should last for 4 years. The project…
A: Depreciation is an accounting method employed to distribute the cost of a tangible asset over its…
Q: An investor is trying to decide between a muni paying 6.20 percent or an equivalent taxable…
A: A municipal bond is a type of bond issued by a state or local government to finance public…
Q: the MIRR of the project t
A: MIRR (Modified Internal Rate of Return):The Modified Internal Rate of Return (MIRR) is a financial…
Q: Shelton Company purchased a parcel of land six years ago for $869,500. At that time, the firm…
A: In decision making activity we considered only the present value of the asset.Historical costs or…
Q: O $90,000 O $105,000 O $82,500 O$99,000 ustomer paid off the account after 15 days, Sombra Corp.…
A: Discount is the amount to be paid less than stated amount and is given for early payment before due…
Q: A project that provides annual cash flows of $22,500 for 7 years costs $84,000 today. a. If the…
A: >Capital budgeting entails determining which projects are financially feasible and which are…
Q: 1. Assuming a discount rate of 10%, compute the net present value of each piece of equipment.…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: Year Cash Flow (A) Cash Flow (B) -S -$ 0 360,000 35,000 55,000 3 55,000 4 430,000 1234 2 45,000…
A: The payback period is a vital financial metric to evaluate the projects at the initial level. It is…
Q: Discuss the implication of share Buybacks and Stock Options on the value of a company?
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield? A. $2,800 B. $3,000 C. $3,400 D. $3,800 E. $7.0001. ACT Inc. has a $1,000 (face value), 20 year bond issue selling for $1,229.40 that pays an annual coupon of 8.0 percent. Their marginal tax rate is 25%. a. What would be BAT's current before-tax component cost of debt? a. What would be BAT's current after-tax component cost of debt?juanita's steak house has 12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. the tax rate is 34%. what is the present value of the tax shield?
- The tax rate applicable to Ivan Co. is 20%. The firm pays 5% interest on the P350,000 outstanding loan and the total preferred dividends to be distributed is P16,500. What is the Financial Breakeven point?Tatum can borrow at 7.2 percent. The company currently has no debt and the cost of equity is 11.6 percent. The current value of the firm is $675,000. The corporate tax rate is 21 percent. What will the value be if the company borrows $390,000 and uses the proceeds to repurchase shares?Rogot Instruments makes fine violins and cellos. It has $1.2 million in debt outstanding, equity valued at $2.7 million and pays corporate income tax at rate 21%. Its cost of equity is 11% and its cost of debt is 8%. What is Rogot's pretax WACC? (Round to two decimalplaces.) What is Rogot's (effective after-tax) WACC? (Round to two decimalplaces.)
- Tatum can borrow at 6.85 percent. The company currently has no debtand the cost of equity is 11.25 percent. The current value of the firm is $640,000. The corporate tax rate is 24 percent. What will the value be if the company borrows $355,000 and uses the proceeds to repurchase shares?Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000 and a price of $1,119.42, which matures in 10 years. The company's tax rate is 30%. 1. What is Lugget's pre-tax cost of debt? 2. What is the company's after-tax cost of debt?Farmington Company can borrow at 7.05 percent. The company currently has no debt and the cost of equity is 11.4 percent. The current value of the firm is $655,000. The corporate tax rate is 22 percent. What will the value be if the company borrows $370,000 and uses the proceeds to repurchase shares? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
- If a corporation has an average tax rate of 30 percent, what is the approximate after cost of debt for a P1,000 par value bond selling for P1,120 that matures in 6 years and pays 12 percent interest annually? a. 8.5%b.6.6%c.12.0%d.13.2%Kelly Corporation is considering the issuance of either debt or preferred stock to finance the purchase of a facility costing P1.5 million. The interest rate on the debt is 16 percent. Preferred stock has a dividend rate of 12 percent. The tax rate is 46 percent. REQUIREMENTS: 1. What is the annual interest payment? 2. What is the annual dividend payment? 3. What is the required income before interest and taxes to satisfy the dividend requirement??Georga's Restaurants has 7,000 bonds outstanding with a face value of $1,000 each, a market price of $982, and a coupon rate of 6.95 percent. The interest is paid semiannually. What is the amount of the annual interest tax shield if the tax rate is 23 percent?