If a company invests $100 million today which will not produce any impact in the near future, but will produce large cost savings in the future, what impact will this have on earnings per share in the current year?
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If a company invests $100 million today which will not produce any impact in the near future, but will produce large cost savings in the future, what impact will this have on earnings per share in the current year?
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- Brushy Mountain Mining Companys coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the companys earnings and dividends are declining at the constant rate of 4% per year. If D0 = 6 and rs = 14%, what is the estimated value of Brushy Mountains stock?A company wants to invest $619,932 today. The expected returns in years 1, 2, and 3 are $244,539, $175,421, and $341,884, respectively. If the rate of return on investment must be at least 15%, and the probability of commercial and technical success are 0.89 and 0.86, respectively. What is the maximum expenditure justified that the company may spend?If a firm earns $375 billion in profits for the year and they retain $218 billion, what is the percent retention rate? And If a firm earns $375 billion in profits for the year and they retain $218 billion, what is the percent dividend payout rate?
- If you owned a company, would you prefer the market value of its assets to rise $10million or the market value of its liabilities to fall $10million?Give typing answer with explanation and conclusion If a firm is considering investing $100,000 at the end of 2021 for employee training (operating expense). The benefit of the training is to reduce turnover leading to a decrease in operating expenses of $10,000 per year in the future. The firm’s working capital to revenue ratio is 10% and the firm’s WACC is 6%. Is it better to analyze this investment decision by considering the incremental after-tax operating profit or the incremental after-tax cash flows generated by this investment? Why?Based on the investor expectations of earning at least 12%, should this projected below be completed? Year 0 1 2 3 4 5 6 Cash Flow (133,000) 37,000 42,750 44,000 46,500 82,500 77,000 Please explain why or why not the company should move forward with this endeavor.
- 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.)A company has a required return of 12%, a profit margin of 4%, a D/E ratio of 0.5 and total asset turnover of 2. Annual dividends last year were $2.00. A) The company has a dividend payout ratio of 20%; calculate the price and forward P/E ratio. B) If the company would have changed its dividend payout ratio to 60%, what would happen to the price and forward P/E ratio? C) What variables are critical to determine if they should increase or decrease their dividend payout ratio? (Hint be specific what variables do you need to know.)If the level of capital is $150 billion, depreciation is 3%, and gross investment is $50 billion. What is Net Investment? What will happen to the capital stock in the economy?
- Matt’s Manufacturing, Inc. expects to earn $45 million per year in perpetuity if it does not undertake any new projects. However, the firm has an investment opportunity that will generate annual earnings of $10 million in perpetuity, beginning two years from today. This investment has an initial (upfront) cost of $10 million today and $5 million next year. The firm has 10 million shares of common stock outstanding, and the required rate of return on the stock is 10% percent. What is the stock price per share if the firm undertakes the investment?If An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent? a. What is the investment's internal rate return? Based on the net present rate return, should the firm makeinvestment? b.What is the investment's net present value? Based on the net present value, should the firm make the investment?Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
