Problem 16.11 – M&M and Taxes
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Given the WACC, the value of equity, and the tax rate… figure out the EBIT and the WACC.
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Given the WACC, the value of equity, and the tax rate… figure out the EBIT and the WACC.
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Given debt-equity ratios, WACC, cost of debt, and the tax rate… figure out the company’s cost of equity, the unlevered cost of equity, and the cost of equity for each different debt-equity ratio given.
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Given the projected quarterly sales, accounts receivable, and three collection periods… calculate the cash collections.
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Determine sales at full capacity, the target assets/sales ratio and the increase in fixed assets.
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Calculate the following for Hubbard’s Pet Foods: expected rate of return on equity and expected to return on the package of common stock and bonds.
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Given the amount borrowed for the line of credit, interest rate, percent deposited in a noninterest-bearing account, the amount needed today, and months to repay… find the EAR and interest paid.
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Forecast notes payable and long-term debt, the growth rate whereby additional financing requirements would equal exactly zero.
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Given EBIT, the interest rate, cost of equity, tax rate, and amount borrowed…
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Given the revolving credit arrangement, interest rate per quarter, compensating balance, short-term investment… figure out the effective annual rate for the different borrowing amounts.
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Determine the percentage increase in sales that would not need an increase in fixed assets, and then determine the balances of notes payable, bonds, common stock, and retained earnings.
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