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# Capital Structure and Firm Value

### Analyzing a Firm's Capital Structure

Assume that a company has \$10 million in assets (where the market value of the assets is equal to the book value of the assets) and no debt. The company's marginal tax rate is 35% and has 500,000 shares outstanding. The company's earnings before interest and taxes (EBIT) is \$3.88 million. The firm's stock price is \$27 per sha

### Financial Markets and Risk in Capital Marketing

1. Explain types of financial markets and importance of financial markets to the economy? 2. Discuss characteristics of financial assets and give examples? 3. What is the difference between financial assets in conventional and Islamic finance? 4. Define money and its different types? 5. Evaluate current financial markets acc

### Debt, Valuation, Net Present Value

Use the following information for questions 1 through 4 Rollins Corporation is estimating its WACC. It's current and target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon rate, paid semiannually, a current maturity of 20 years, and sell for \$1

### DCF and fair market value

Consider the financial statements below. The firm's cost of capital is 10%. The firm is stable and the long-term growth rate for all items is expected to be 4%. Use the information below to estimate the fair market value of the companies equity as of year-end 2013. 2013 Income Statement Sales 500 Cost of goods sold 250 S

### Financial Management: Cash Conversion Cycles

1. How do the following circumstances affect the cash conversion cycle: (a) favorable credit terms allow the firm to pay its accounts payable slower (b) inventory turnover increases (c) accounts receivable turnover decreases? 2. What are some things you could do to speed up the cash conversion cycle? 3. What are some of

### Calculating factors impacting cash flow

The director of capital budgeting for a firm has identified two mutually exclusive projects, A and B, with the following expected net cash flows: Expected Net Cash Flows Year Project A Project B 0 (\$120) (\$120) 1 80 20

### Maximum Debt Ratio of a Start-Up

A start-up company is seeking your advice concerning its debt ratio and capital structure decisions. It will require \$1,000,000 of total assets and anticipates sales during its first year of operation to be \$650,000. The sum of its operating costs and cost of goods sold will be \$525,000.The company can borrow funds at an inter

### Community Bank & Trust: Dollar Gap Analysis

Jack Brothers had recently taken over the management of the securities portfolio at Community Bank & Trust, a \$100 million asset-size bank in a suburb of a large U.S. city. Previously, Jack worked in the loan portfolio of a bank in another state. He had gained favorable recommendations from his prior employers in large part due

### Interest Tax Shield & Financial Success

What is an interest tax shield? What does it mean to the financial success of a firm?

### Google ratio analysis 2012 2013

I need to Calculate the financial ratios (show your calculations) for the Google using Yahoo!Â® Finance to locate its two most recent annual financial statements.

### Valuing a copper mining project using forward prices

Harrington Explorations Inc. is interested in expanding it copper mining operations Indonesia. The area has long been noted for its rich deposits of copper, ore with copper prices at near record levels, the company is considering an investment of \$60 million to open operations into a new vein of ore that was mapped by company ge

### Continuous Quality Improvement: Mercedes

I came a cross an old article which is attached here. I have highlighted in red 2 areas which caught my eye. I kept wondering the philosophies and approaches and their applicability in today's turbulent global environment for Mercedes. I know this is a 2001 article but I think its worth understanding so I am asking for some help

### Internal Growth Rate and Sustainable Growth Rate for S&S Air

I need some help in this case study: S&S AIR, INC. GENERAL INFORMATION: Chris Guthrie was recently hired by S&S Air Ltd, to assist the company with its financial planning and to evaluate the company's performance. Chris graduated from university five years ago with a finance degree. He has been employed in the finance departm

### Capital Structure of Ebay, Clorox and Alaska Air Group

What would you recommend to be the capital structure (total liabilities or debt and equity proportions) for each of the three companies below: i. eBay (NasdaqGS: EBAY) ii. The Clorox Company (NYSE: CLX) iii. Alaska Air Group Inc. (NYSE: ALK)

### Lease and Bond valuation questions

1. A lease versus purchase analysis should compare the cost of leasing to the cost of ownin, assuming that the asset purchased A. is financed with short-term debt B. is financed with long-term debt. C. is financed with debt whose maturity matches the term of the lease. D. is financed with a mix of debt and equity based on

### Calculating the net initial investment

A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost \$30,000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for \$25,000. The new asset will cost \$75,000 and will also be depreciated under MACRS using a

### Optimal Capital Structure

one question need help with 15.12 all work to be shown to increase comprehension and balance against my solution. What is the firms optimal capital structure and weighted average cost of capital.

### Apex Printing - SOX 302 Compliance

All I need is 400 words on this. Apex Printing has provided its financial statements from the prior 2 years for you to review during your first week with the company. Your objective is to become familiar with the company's recent historical performance so that it can be benchmarked to competitor performance in the future. It

### Efficient capital markets

This is one of six different sets of questions I need assistance with. Please see attachment. The questions are efficient capital markets and efficient market hypothesis, amongst other things.

### Capital Structure of Amazon, Ebay and Overstock compared

I need help with the following questions. I have already collected the necessary data for Amazon.com. 1. Review the data below and decide give your recommendations as to whether or not you consider these ratios to be too small or too large. Should Amazon increase its debt or take steps to pay off its debt? Amazon.com Data:

### Using cost of capital to determine feasibility of a project

Calculate the weighted average cost of capital (WACC) for Apex Printing given these assumptions. Weights of 40% debt and 60% common equity, a 35% tax rate, cost of debt is 8% Beta of the company is 1.5 Risk free rate is 2% and return on the market is 11%. Indicate how these cost of capital might be used to determine the feasibi

### Capital Structure Analysis

ABC is a successful winery company with a stable market share of Chinese wine in China. The sales growth rate for its Chinese wine in the coming 5 years is expected to be stagnant because of the fierce competition in the winery market and demographic decline in the number of Chinese liquor drinkers. The CEO of the company, Mr Ch

### Traditional IRA vs Roth IRA

Suppose one of your clients is four years away from retirement and has only \$2,500 in pretax income to devote to either Roth or traditional IRA. The traditional IRA permits investors to contribute the full \$2,500 since contributions to these accounts are tax-deductible, but they must pay taxes on all future distributions. In con

### The Investment Setting

Questions 1. Discuss the overall purpose people have for investing. Define investment. 2. Discuss why you would expect the saving-borrowing pattern to differ by occupation for example, (for a doctor versus a plumber) 3. Discuss the three components of an investor's required rate of return on an investment. 4. Discuss the two

### EPS simple capital structure

On January 1, 2010, Bio Industries had stock outstanding as follows. 8% Noncumulative preferred stock, \$100 par value, issued and outstanding 250,000 shares \$25,000,000 Common stock, \$1 par value, issued and outstanding 600,000 shares 600,000 To acquire the net assets of three smaller companies, Bio issued an additional 600,0

### Advantages and disadvantages of TMS's new decentralized IS structure, as well as impact of new structure on decision rights and accountability

Discuss the advantages of TMS's new decentralized IS structure. What are its disadvantages? How did the new structure change decision rights? How did it change accountability for IS project success?

### Debt, Capital Structure, and Borrowing Costs

Cost of common stock: Seerex Wok Co. is expected to pay a dividend of \$1.10 one year from today on its common shares. That dividend is expected to increase by 5 percent every year thereafter. If the price of Seerex is \$13.75, then what is Seerex's cost of common equity? Cost of common equity = % Cost of common stock:Fj

### Capital structure: fallacies and misconceptions

What type of capital structure should a firm choose and why? Please include capital structure fallacies and their effects on a firm's decision.

### The Capital Structure Theory

Solve each question by analyzing the situation below. A business with no debt financing has a firm value of \$20 million. It has a corporate marginal tax rate of 34%. The firm's investors are estimated to have marginal tax rates of 31% on interest income and a weighted average of 28% on stock income. The business is plannin

### Workplace Organizational Structure

Organizational Structure The structure of an organization can influence the overall success of a project from initiation to closure. Identify if your organization is centralized or decentralized and evaluate benefits and weaknesses of the structure. Would you change from centralized or decentralized to meet the needs of yo