Questions from Corporate Finance

Q: See Table 2.5 showing financial statement data and stock price

See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. Compute Mydeco’s PE ratio each year from 2012 to 2016. In which year was it the highest? b. Wh...

Q: Suppose Alpha Industries and Omega Technology have identical assets that generate identical

Suppose Alpha Industries and Omega Technology have identical assets that generate identical cash flows. Alpha Industries is an all-equity firm, with 10 million shares outstanding that trade for a pric...

Q: Cisoft is a highly profitable technology firm that currently has $5

Cisoft is a highly profitable technology firm that currently has $5 billion in cash. The firm has decided to use this cash to repurchase shares from investors, and it has already announced these plans...

Q: Schwartz Industry is an industrial company with 100 million shares outstanding and

Schwartz Industry is an industrial company with 100 million shares outstanding and a market capitalization (equity value) of $4 billion. It has $2 billion of debt outstanding. Management have decided...

Q: Zetatron is an all-equity firm with 100 million shares outstanding

Zetatron is an all-equity firm with 100 million shares outstanding, which are currently trading for $7.50 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $...

Q: Pelamed Pharmaceuticals has EBIT of $325 million in 2006. In

Pelamed Pharmaceuticals has EBIT of $325 million in 2006. In addition, Pelamed has interest expenses of $125 million and a corporate tax rate of 40%. a. What is Pelamed’s 2006 net income? b. What is t...

Q: Rogot Instruments makes fine violins and cellos. It has $1

Rogot Instruments makes fine violins and cellos. It has $1 million in debt outstanding, equity valued at $2 million, and pays corporate income tax at rate of 35%. Its cost of equity is 12% and its cos...

Q: Restex maintains a debt-equity ratio of 0.85,

Restex maintains a debt-equity ratio of 0.85, and has an equity cost of capital of 12% and a debt cost of capital of 7%. Restex’s corporate tax rate is 40%, and its market capitalization is $220 milli...

Q: Acme Storage has a market capitalization of $100 million and debt

Acme Storage has a market capitalization of $100 million and debt outstanding of $40 million. Acme plans to maintain this same debt-equity ratio in the future. The firm pays an interest rate of 7.5% o...

Q: Milton Industries expects free cash flow of $5 million each year

Milton Industries expects free cash flow of $5 million each year. Milton’s corporate tax rate is 35%, and its unlevered cost of capital is 15%. The firm also has outstanding debt of $19.05 million, an...