Finance Multiple Misc. Problems

Finance Multiple Misc. Problems

Question
	


1.numbers are $2.1 million &1.4 million: 


plan b leverage $1.4 million, 11.1% interest $10 common share















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34% tax rate


$317000 annually


2. The first (Plan A) is an all-common-equity capital structure. $2.1 million dollars would be raised by selling common stock at $10 per share. Plan B would involve the use of financial leverage. $1.4 million dollars would be raised by selling bonds with an effective interest rate of 11.1% (per annum), and the remaining $1.4 million would be raised by selling common stock at the $10 price per share. The use of financial leverage is considered to be a permanent part of the firm’s capitalization, so no fixed maturity date is needed for the analysis. A 30% tax rate is deemed appropriate for the analysis. a. Find the EBIT indifference level associated with the two financing plans. (Round the nearest dollar.) b. A detailed financial analysis of the firm’s prospects suggests that the long-term EBIT will be above $317,000 annually. Taking this into consideration, which plan will generate the higher EPS? (Round income statement amounts to the nearest dollar except the EPS to the nearest cent.)






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Q3 The target cost of capital for jawers manufacturing




50% common stock


14% preferred stock


36% debt


19.2% cost of preferred stock


12.7%


9.9%


tax rate 34%




Q4. The target capital structure for QM industries is 39% common stock, 8% preferred stock and 53%debt. If the cost of common equity for the firm is 18.6%, the cost of preferred stock is 10.8%, the before-tax cost of debt is 7.8%, and the firm's tax rate is 35%, what is QM weighted average cost of capital.


Q5. Cryton electronics has a capital structure consisting of 42% common stock and 58% debt. A debt issue of 00 par value, 6.1% bonds that mature in 15years and pay annual interest will sell for $977, Common stock of the firm is currently selling for $30.32 per share and the firm expects to pay $2.33 dividend next year. Dividends have grown at a rate of 5.2% per year and are expected to continue to do so for the foreseeable future. What is Cryptons cost of capital where the firms tax rate is 30%


Q6. Weighted average cost of capital---- the target capital structure of QM industries is 41% common stock, 13% preferred stock, and 46% debt. If the cost of common equity for the firm is 17.4% the cost of preferred stock is 9.5%, the before tax cost of debt is 7.4%, and the firms tax rate is 35%. what is QM weighted average cost of capital?


Q7. CE. has a capital structure consisting of 45% common stock and 55% debt. A debt issue of $1000 par value, 6.2% bonds that mature in 15 years and pay annual interest will sell for $977. common stock of the firm is currently selling for $30.86 per share and the firm expects to pay a $2.31 dividend next year. Dividends have grown at a rate of 4.9% per year and are expected to continue to do so for the foreseeable future. What is Cryptons cost of capital where the firms tax rate is 30%


Q8. The target capital structure for Jowers m. is 45% common stock, 20% preferred stock and 35% debt. if the cost of common equity for the firm is 20.8%, the cost of preferred stock is 11.8% and the before tax cost is 9.2%, what is jowers cost of capital? The firms tax rate is 34%


Q9. Plan A is a all common equity structure in which $2.3 million dollars would be raised by selling 88000 shares of common stock


Plan B would involve issuing $1.4 million dollars in long term bonds with an effective interest rate of 12.1% plus $0.9 million would be raised by selling 44000 shares of common stock. The debt funds raised under Plan b have no fixed maturity date, in that this amount of financial leverage is considered a permanent part of the firms capital structure.


Abe and his partners paln to use a 38% tax rate in their anlysi