Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet $ 30 Debt 70 Equity $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets Balance $ 30 185 $ 215 Sheet Debt Equity $ 50 50 $ 100 $ 50 165 $ 215 Assume that MM's theory holds except for taxes. There is no growth, and the $50 of debt is expected to be permanent. Assume. corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if Debt 6.8% and rEquity 16.2%? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of years. What will be the new value of the firm, other things equal? Assume an 6.8 % borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.

Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet $ 30 Debt 70 Equity $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets Balance $ 30 185 $ 215 Sheet Debt Equity $ 50 50 $ 100 $ 50 165 $ 215 Assume that MM's theory holds except for taxes. There is no growth, and the $50 of debt is expected to be permanent. Assume. corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if Debt 6.8% and rEquity 16.2%? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of years. What will be the new value of the firm, other things equal? Assume an 6.8 % borrowing rate. Note: Do not round intermediate calculations. Enter your answer in million rounded to 2 decimal places.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet $ 40 60 $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets Debt Equity Balance Sheet Debt Equity $ 40 195 $ 235 a. PV tax shield b. WACC c. New value of the firm $ 30 70 $ 100. Assume that MM's theory holds except for taxes. There is no growth, and the $30 of debt is expected to be permanent. Assume a 21% corporate tax rate. $ 30 205 $ 235 a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if pebt Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new value of the firm, other…
Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Debt $ 55 45 Equity $ 100 Net working capital Long-term assets Market-Value Net working capital Long-term assets. Balance $ 55 210 $ 265 Sheet Debt a. PV tax shield b. WACC c. New value of the firm Equity $75 25 $100 Assume that MM's theory holds except for taxes. There is no growth, and the $75 of debt is expected to be permanent. Assume a 21% corporate tax rate. $75 190 $265 a. How much of the firm's value is accounted for by the debt-generated tax shield? Note: Enter your answer in million rounded to 2 decimal places. b. What is United Frypan's after-tax WACC if rDebt = 7.3% and rEquity = 15.7%? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be the new…
Bombay Company's book and market value balance sheets are as follows: (NWC = net working capital; LTA = long term assets; D = debt; E = equity; V = firm value): Book Values Market Values NWC 200 500 D NWC 200 500 D LTA 2,300 2,00 E LTA 2,800 2,500 E 2,500 2,500 V 3,000 3,000 V According to MM's Proposition I corrected for taxes, what will be the change in company value if Bombay issues $200 of equity and uses it to make a permanent reduction in the company's debt? Assume a 21 percent marginal corporate tax rate. Multiple Choice A) +$70 B) −$42 C) $0 D) +$140 Please show your work
Nelson Company's current liabilities are P50,000, its long-term liabilities are P150,000, and its working capital is P80,000. If Nelson Company's debt-to-equity ratio is 0.32, its total long-term assets must equal O P625,000 O P825,000 O P745,000 O P695.000 Hydro Cable wishes to calculate their return on assets (ROA). You know that the return on equity (ROE) is 12% and that the debt ratio is 40%. What is the ROA? 0 4.8% O 20% 0 7.2% O 12% Tech Manufacturing Company realized P15,000,000 in sales, with a cost of goods sold of P6,000,000, gross profit margin of 45% of net sales, operating expenses of P4,500,000, tax rate of 35%, and average total assets of P6,500,000. What is Tech's Return on Assets (ROA)? O 42.5% O 50% O 45% O 47.75%
Table1: Information of the firms Unlevered firm Levered firm EBIT :10000 :10000 Interest :0 :3200 Taxable income : ? : ? Tax (tax rate: 34%) : ? : ? Net income : ? : ? CFFA : ? : ? Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5 a)Fill in the blanks b) What is the present value of the tax shield? c) What is the size of debt?
Consider the following data for the firms Acme and Apex: Equity ($ million) Debt ($ million) ROC Cost of Capital Acme 290 145 17% 9% Apex 1,450 483 15% 10% a. Calculate the economic value added for Acme and Apex (round to 2 decimal places). Economic value added for Acme $? million Economic value added for Apex $? million b. Calculate the economic value added per dollar of invested capital for Acme and Apex (round to 2 decimal places)? Economic value added for Acme per dollar Economic value added for Apex per dollar
Use the table for the question(s) below. Name Gannet McClatchy Media General New York Times 2423 Lee Enterprises Average Maximum Minimum $7.17 $7.67 Market $5.67 $5.20 Capitalization ($ Value million) million) 6350 675 326 Enterprise 267 10,163 3472 3061 1192 1724 ($ P/E 7.36 18.09 9.76 Price/ Enterprise Book Value/ Sales 0.73 2.64 1.68 14.89 0.39 -40% 6.55 0.82 11.33 1.25 +60% 112% 1.4 1.10 1.40 1.31 1.57 1.35 +16% |-69% -18% Enterprise Value/ EBITDA 5.04 7.21 5.64 7.65 6.65 The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry. Another newspaper publishing firm (not shown) had sales of $600 million, EPS of $0.50, excess cash of $68 million, $18 million of debt, and 120 million shares outstanding. If the average PE ratio is used for comparable businesses is used, which of the following is the best estimate of the firm's share price? 6.84 +22% -19%
From the following information of Axis Limited compute the Replacement Cost Value / Net Substantial Value Liabilities Equity Share Capital Preference Share Capital Reserves and Surplus Adjustment Long-term Debt Short-term Debt Creditors Amount (Mn$) 2000 1100 800 1400 800 1700 Assets 1100 Debtors 8,900 Fixed Assets Inventories Cash and Bank Balance Amount (Mn$) 4100 2350 1150 1300 8,900
Can you explain the information below market value added (MVA) analysis and interpretation of results below. Market Value of Equity:$133,341,000,000.00 Plus: Market Value of Debt:$13,677,000.00 Equals: Market Value of Firm:$133,354,677,000.00 Minus: Total Invested Capital:($1,944,100.00) Equals: MVA$133,356,621,100.00
i) PAT - 4000 Cr ii) Tangible Fixed Assets -3300 Cr iii) Depreciation 8.5 % iv) Identifiable Intangible other than brand -1200 Cr v) Risk Premium – 5 % vi) Return from Market is 10 % vii) Beta of the company –Double the market viii) Tax rate – 20 % ix) Debenture Interest Rate is 9 % ) Debt : Equity is in the ratio of 3:2 xi) Expected normal return on Tangible Assets ( Weighted Average Cost of capital + 25 % of the Cost of Debt Post Tax xii ) Appropriate Capitalization rates for Intangibles – 22 % Determine the possible value of Brand as per Potential Earnings Model
Calculate the market to book ratio ,debt equity ratio and retained income for the year. whats wrong with my answers kindly Answer 1. Market to book ratio = Market capitalisation/ Net book value = 243,000,000/1,750,000 = 138.85 Market capitalisation = MPS x No. of shares = 270 x 900,000 = 243,000,000 As the original cost of assets and depreciation is not given, we can assume that non-current assets as the net book value. Step 2 2. Debt/equity ratio = (Short term debt+Long term debt)/Shareholder's fund = (730,000+180,000)/(1,800,000+160,000) Debt-equity ratio = 910,000/1,960,000 = 0.464 Short term debt is payables in the ques, long term debt is the loan amount in the ques, and shareholders' fund = Share capital + Retained earnings Debt equity is less than 1 which means that it is a low levered company i.e. it has a low level of debt in comparison to equity. 3. Retained earning is given = 160,000
Here are book- and market-value balance sheets of the United Frypan Company (figures in $ millions): Book-Value Balance Sheet Net working capital $ 50 Debt $ 70 Long-term assets 50 Equity 30 $ 100 $ 100 Market-Value Balance Sheet Net working capital $ 50 Debt $ 70 Long-term assets 160 Equity 140 $ 210 $ 210 Assume that MM’s theory holds except for taxes. There is no growth, and the $70 of debt is expected to be permanent. Assume a 21% corporate tax rate. a. How much of the firm's market value is accounted for by the debt-generated tax shield? (Enter your answer in million rounded to 2 decimal places.) b. What is United Frypan’s after-tax WACC if rDebt = 6.3% and rEquity = 16.7%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Now suppose that Congress passes a law that eliminates the deductibility of interest for tax purposes after a grace period of 5 years. What will be…

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