Questions from Corporate Finance

Q: Empress Corp. has no debt but can borrow at 8.2

Empress Corp. has no debt but can borrow at 8.2 percent. The firm’s WACC is currently 11 percent, and the tax rate is 35 percent.a. What is the company’s cost of equity?b. If the firm converts to 25 p...

Q: Frederick & Co. expects its EBIT to be $92,000 every

Frederick & Co. expects its EBIT to be $92,000 every year forever. The firm can borrow at 9 percent. Frederick currently has no debt, and its cost of equity is 15 percent. If the tax rate is 35 percen...

Q: In Problem 14, what is the cost of equity after

In Problem 14, what is the cost of equity after recapitalization? What is the WACC? What are the implications for the firm’s capital structure decision?Problem 14:Frederick & Co. expects its EBIT to b...

Q: Based on the following information, calculate the expected return:

Based on the following information, calculate the expected return:,,,

Q: Repeat parts (a) and (b) in Problem 1 assuming Maynard

Repeat parts (a) and (b) in Problem 1 assuming Maynard has a tax rate of 35 percent.Parts (a) and (b) in Problem 1:a. Calculate earnings per share (EPS) under each of the three economic scenarios befo...

Q: Suppose the company in Problem 1 has a market to-

Suppose the company in Problem 1 has a market to- book ratio of 1.0.Problem 1:Maynard, Inc., has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes, EBIT, are...

Q: James Corporation is comparing two different capital structures: an all-equity

James Corporation is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 160,000 shares of stock outstanding. Und...

Q: In Problem 4, use M&M Proposition I to find the

In Problem 4, use M&M Proposition I to find the price per share of equity under each of the two proposed plans. What is the value of the firm?Problem 4:James Corporation is comparing two different cap...

Q: Keenan Corp. is comparing two different capital structures. Plan I

Keenan Corp. is comparing two different capital structures. Plan I would result in 7,000 shares of stock and $160,000 in debt. Plan II would result in 5,000 shares of stock and $240,000 in debt. The i...

Q: Ignoring taxes in Problem 6, what is the price per

Ignoring taxes in Problem 6, what is the price per share of equity under Plan I? Plan II? What principle is illustrated by your answers?Problem 6:Keenan Corp. is comparing two different capital struct...