If the Stanford Corporation's net income is $200 million, its common equity is $833 million, and management plans to retain 70 percent of the firm's earnings to finance new investments, what will be the firm's growth rate?
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If the Stanford Corporation's net income is $200 million, its common equity is $833 million, and management plans to retain 70 percent of the firm's earnings to finance new investments, what will be the firm's growth rate?
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- Given: Firm A is all-equity financed and has total assets of $200 million. Firm B is an identical firm to Firm A, but 70% of its $200 million of total assets are financed with debt bearing an interest rate of 5%. Assume firms pay corporate taxes at the rate of 20% of taxable earnings. Both firms have the same EBIT, $15 million. Compute Firm B's interest deduction. Firm B’s interest deduction is $ ______ million. Keep the result with one decimal.Consider a firm with an EBIT of P552,000. The firm finances its assets with P1,020,000 debt (costing 5.7 percent) and 202,000 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by P900,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at P552,000. Calculate the EPS after the change in capital structure and indicate changes in EPS. (Round your answers to 2 decimal places.)Consider a firm with an EBIT of P552,000. The firm finances its assets with P1,020,000 debt (costing 5.7 percent) and 202,000 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by P900,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at P552,000. Calculate the EPS after the change in capital structure. (No peso signs, spaces, and round your answers to 2 decimal places.) *
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