Q: Suppose a firm has an EBIT of $5 million, interest
Suppose a firm has an EBIT of $5 million, interest expenses of $2 million, depreciation expenses of $1 million, and a tax rate of 35 percent. Its bank agrees to lend up to 4 times its EBITDA. How much...
See AnswerQ: Suppose an all-equity firm has a beta estimated to be
Suppose an all-equity firm has a beta estimated to be 1.2. If the firm changes its capital structure such that its debt-to-equity ratio is now 0.4, what should be the revised beta estimate if it also...
See AnswerQ: Suppose BetLev Inc. has a capital structure with 65 percent debt
Suppose BetLev Inc. has a capital structure with 65 percent debt and 35 percent equity, a (levered) beta of 1.3, and a corporate tax rate of 35 percent. Estimate the unlevered beta of BetLev.
See AnswerQ: Now suppose BetLev wishes to have a target capital structure of 50
Now suppose BetLev wishes to have a target capital structure of 50 percent debt and 50 percent equity. What will be its levered beta at the target capital structure?
See AnswerQ: Pepper Inc. is expected to have before-tax earnings of
Pepper Inc. is expected to have before-tax earnings of $2.5 million next year. The tax rate is 35 percent. There are 2 million common shares outstanding. Comparable firms in the same industry are esti...
See AnswerQ: Extra Value Inc. is expected to generate EBIT of $20
Extra Value Inc. is expected to generate EBIT of $20 million next year, with anticipated depreciation and amortization of $3 million. Extra Value has debt of $40 million. Comparable firms are trading...
See AnswerQ: Eeeva Inc. has an EBIT of $1.5 million
Eeeva Inc. has an EBIT of $1.5 million. The tax rate is 35 percent. Eeeva has a debt of $2.5 million and common equity of $5 million. Eeeva’s cost of capital is estimated to be 11 percent. Calculate E...
See AnswerQ: Suppose year 2’s days of inventory were reduced to 35. How
Suppose year 2’s days of inventory were reduced to 35. How much cash would be freed up?
See AnswerQ: Suppose year 2’s days of receivables were reduced to 35. How
Suppose year 2’s days of receivables were reduced to 35. How much cash would be freed up?
See AnswerQ: Suppose year 2’s days of payables were increased to 40. How
Suppose year 2’s days of payables were increased to 40. How much cash would be freed up?
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