Lily Co. is expected to pay a dividend of $12 at the end of this year. The firm would like to issue new common stock to raise project funds but expects to incur flotation costs of 4%. The company's dividends are expected to grow at a constant rate of 6% indefinitely. Currently the stock is selling for $120. What is the after-tax cost of this firm’s equity? Assume a tax rate of 40%.

Q: . If the tax rate is 25 percent, what is the value of the firm? (Do not round intermediate…

A: Firm Value: It represents the sum of all the creditor's claims & shareholders. It can be…

Q: The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for…

A: Since asked only for number 3, the only answer of only 3 will be provided

Q: You expect that Bean Enterprises will have earnings per share of $2 for the coming year· Bean plans…

A: EPS: It measures the company’s profitability. It shows the earnings of the company’s shareholders.

Q: The GIN Corp. is expected to pay a dividend of S3 which is expected to grow at 2% for a foreseeable…

A: WACC is the overall average cost of the all finance sources. It is equal to sum of product of cost…

Q: Calvert Corporation expects an EBIT of $25,500 every year forever. The company currently has no…

A: Given information, EBIT = $25,500 Cost of Equity = 15.4% Borrow rate = 10.2% Tax rate =21%

Q: The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for…

A: The cost of capital is the cost paid by the issuer to the investor or holder of the security. It…

Q: king Inc. is expected to generate EBIT of $5 million annually in perpetuity (starting in one year).…

A: After doing repurchase using the debt the number of shares decreases but cost of capital decreases…

Q: Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is…

A: There is no debt and no preferred stock in capital structure of company S. It means that the company…

Q: The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for…

A: The cost of debt which is known as a kd in the terms of finance is the cost of purchasing the debt…

Q: Wazir Ali Corporation expects next year’s net income to be $15 million. The firm’s debt ratio is…

A: Residual dividend policy is the policy in which the earnings of the company are first used for the…

Q: Rose Company Limited expects its EBIT to be $100,000 every year forever. The firm can borrow at 9…

A: The Weighted Average Cost of Capital (WACC) is used mainly for the purpose of making long-term…

Q: Altamonte Telecommunications has a target capital structure that consists of 60% debt and 40%…

A: Given: Capital budgeting = $2,000,000 Net income = $1,300,000 Debt weight = 60% Equity weight = 40%

Q: Oregano Inc. estimates that this year’s earnings will be $75 million. There are 12 million shares…

A: A dividend is a payment made to shareholders by publicly traded firms, and it is derived from the…

Q: Kruger Associates is considering a substantial investment in the stock of McIntyre Enterprises.…

A: Year1 D1= D0(1+g) =1.5(1.15) =1.725 Year2 D2= D1(1+g) =1.725(1.15)= 1.9838 Year2 D3= D2(1+g)…

Q: Meyer & Co. expects its EBIT to be $115,000 every year forever. The firm can borrow at 7…

A: EBIT = $115,000Cost of Equity = 13% or 0.13Tax Rate = 24% or 0.24 Calculation of the Value of the…

Q: Blue Co., a company with 25% tax rate, has a free cash flow of P150,000,000 for the next year and is…

A: FCF1 = P 150,000,000 Growth rate (g) = 4% Debt to equity (D/E) = 0.25 Cost of debt = Rd = 5% Cost of…

Q: eavy Metal Corporation is expected to generate the following free cash flows over the next five​…

A: Enterprise value will be the sum of present value all free cash flows and present value of terminal…

Q: The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the…

A: EBIT= $60,000 Unlevered Cost of capital (Vu)= 12% Tax rate= 30% Debt value= $20,000 Annual coupon…

Q: You expect that Bean Enterprises will have earnings per share of $2 for the coming year. Bean plans…

A: No Dividend for three years  Cost of reinvestment =20% Earnings for fourth year =2(1.2)4=3.46 50% is…

Q: Salsa Inc. estimates that this year’s earnings will be $75 million. There are 12 million shares…

A: a) Earning per share = Yearly earnings / Number of shares = 75,000,000 / 12,000,000 = $ 6.25…

Q: The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the…

A: Value of Unlevered firm (Vu)Vu=EBIT1-TRu where T= Tax rate, Ru=Unlevered cost of capital Value of…

Q: The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the…

A: As per MM proportion 2 value of unlevered firm will increase by present value of tax shield provided…

Q: Sambonoza Enterprises projects its sales next year to be $4 million and expects to earn 5 percent of…

A: The financing requirement is the total funds or capital required by the company.

Q: What will the WACC be after recapitalization?

A: WACC: It is the weighted average cost of capital of the corporation for raising various sources of…

Q: Bloom Company Limited expects its EBIT to be $100,000 every year forever. The firm can borrow at 9…

A: EBIT = $100000 Cost of debt (Rd) = 9% Cost of equity (Re) = 18% Tax rate (T) = 35% Debt amount =…

Q: Sidman Products's common stock currently sells for $49 a share. The firm is expected to earn $4.41…

A: Given; Current market price = $49 Expected earnings per share = $4.41 Year end dividend = $2.80

Q: Leni Inc. is an all-equity firm. At the end of the current year, the CFO expects EBIT to be $10M,…

A: Market value: = Total number of shares × Market price per share

Q: Milton Inc. is an all-equity firm and investors expect it to remain an all-equity firm in the…

A: Free Cash Flows(FCF) refers to net cash available to common stockholders of an entity that is used…

Q: a) Calculate the price per share of Mitsui Ltd immediately before the repurchase announcement. b)…

A: Share price is the price at which share can be purchased from the stock market. Shareholders try to…

Q: Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year…

A: Dividend Discount model is used to calculate this. Dividend for Year 1,2 and 3 is calculated along…

Q: In year​ 1, AMC will earn $2,900 before interest and taxes. The market expects these earnings to…

A: Free cash flow to equity (FCFE): It is  the fund  generated by  business available to be potentially…

Q: Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year…

A: Discounted dividend model is used to calculate the fair value of the stock. Dividend for Year 1,2…

Q: Linkcomn expects an Eamnings after Taxes of 7500005 every year. The firm currently has 100% Equity…

A: Earnings after tax(EAT) = 7500005 Cost if Equity (ke) = 12% Value of a firm is the present value of…

Q: Scampini Technologies is expected to generate $50 million in free cash flow next year, and FCF is…

A: The share price is the current market price of the share. It is the price of the share at any…

Q: Pimento Inc. estimates that this year’s earnings will be $75 million. There are 12 million shares…

A: Given: Earnings = $75 million Shares outstanding = 12 Million Price = $27.50

Q: New Schools is an all-equity company with an expected EBIT of $94,000 every year forever. The…

A: Value of Unlevered firm = EBIT(1 – tax rate)/cost of equity Value of Unlevered firm = $94,000(1 –…

Q: You expect that Bean Enterprises will have earnings per share of​ $2 for the coming year. Bean plans…

A: Dividend per share refers to the amount of the net income which is paid to the equity shareholders.…

Q: Allison Engines Corporation has established a target capital structure of 40 % debt and 60% common…

A: Ke = D1/ P + g Where  Ke = cost of equity D1 = latest dividend P = price after floatation cost g =…

Q: Southern Timber Company expects to have an EBIT of $10 million in the coming year, and its EBIT is…

A: According to M&M Model the value of levered firm will be sum of value of unlevered firm plus tax…

Q: The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed…

A: In residual distribution model, we distribute dividend from net income after retaining funds for…

Q: Sims Manufacturing is expected to generate $180 million in free cash flow next year, and FCF is…

A: Calculation of stock’s value per share: Answer: Stock value per share is $5.14

Q: The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for…

A: The Weighted average cost of capital is the cost of each capital consider with their weights. The…

Q: The management of Final Designs, Inc., or FinD, has decided that the optimal capital structure for…

A:

Q: Pack-and-Send, Inc. expects to have free cash flow of $6.5 million next year and this cash flow will…

A: Financial ratios establish the relationship between two financial items from an income statement or…

Q: Widgets Inc has an expected EBIT of $64,000 in perpetuity and a tax rate of 35 percent. The firm has…

A: The question is based on assumptions of MM proposition I with taxes, the value of firm may increase…

Q: Wichita Realty Trust is expected to pay a modest dividend of $1.00/share for two years and then…

A: Given information: Rate of return is 10% Dividend for first two years is $1.00 Dividend for next…