Questions from Financial Management

Q: Ethier Enterprise has an unlevered beta of 1.0. Ethier

Ethier Enterprise has an unlevered beta of 1.0. Ethier is financed with 50% debt and has a levered beta of 1.6. If the risk-free rate is 5.5% and the market risk premium is 6%, how much is the additio...

Q: Nichols Corporation’s value of operations is equal to $500 million after

Nichols Corporation’s value of operations is equal to $500 million after a recapitalization (the firm had no debt before the recap). It raised $200 million in new debt and used this to buy back stock....

Q: Define each of the following terms: a. Weighted average

Define each of the following terms: a. Weighted average cost of capital, WACC; after-tax cost of debt, rd(1 - T); after-tax cost of short-term debt, rstd(1 - T) b. Cost of preferred stock, rps; cost...

Q: Lee Manufacturing’s value of operations is equal to $900 million after

Lee Manufacturing’s value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million in new debt and used this to buy back stock....

Q: Dye Trucking raised $150 million in new debt and used this

Dye Trucking raised $150 million in new debt and used this to buy back stock. After the recap, Dye’s stock price is $7.50. If Dye had 60 million shares of stock before the recap, how many shares does...

Q: Schweser Satellites Inc. produces satellite earth stations that sell for $

Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm’s fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500...

Q: The Rivoli Company has no debt outstanding, and its financial position

The Rivoli Company has no debt outstanding, and its financial position is given by the following data: The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it mo...

Q: Pettit Printing Company has a total market value of $100 million

Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company’s EBIT...

Q: Broussard Skateboard’s sales are expected to increase by 15% from $

Broussard Skateboard’s sales are expected to increase by 15% from $8 million in 2015 to $9.2 million in 2016. Its assets totaled $5 million at the end of 2015. Broussard is already at full capacity, s...

Q: The financial staff of Cairn Communications has identified the following information for

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: The Company faces a 40% tax rate. What is the proje...