Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: 0 2 3 4 +$125 $250 +$375 +$500 The firm's tax rate is 34 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 2; if the firm were financed entirely with equity, the required return would be 10 percent. -$990 What is the levered after-tax incremental cash flow for year 4? Multiple Choice $281,704,000 -$194,848,000 $465,152,000 $460,796,000
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- Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: 0. $990 +S125 +S225 +$375 +S500 The firm's tax rate is 34 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 2, if the firm were financed entirely with equity, the required return would be 10 percent. What is the levered after-tax incremental cash flow for year 4? (Note: If you cannot view the image, you can download it here: CashFlows.PNG) O $281,704,000 O $465,152,000 -$194,848,000 O, 5460,796,000 8:4Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: 0 $990 +$125 +$225 +$375 +$500 The firm's tax rate is 34 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 3; if the firm were financed entirely with equity, the required return would be 10 percent. Using the flow to equity Imethodology, what is the value of the equity claim? Multiple Choice O -$1,540,000 $446,570,866.00 $36,580,76755 3 $30,716,23613If the value of a levered firm is $7 million, what is the value of the same firm with all-equity financing? Assume MM with taxes holds. a. $7 million O b. $6 million O c. $9 million O d. $8 million
- A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)(Capital structure analysis) The liabilities and owners' equity for Campbell Industries is found here: LOADING... . a. What percentage of the firm's assets does the firm finance using debt (liabilities)? b. If Campbell were to purchase a new warehouse for $1.1 million and finance it entirely with long-term debt, what would be the firm's new debt ratio? Accounts payable $519,000 Notes payable $248,000 Current liabilities $767,000 Long-term debt $1,101,000 Common equity $4,647,000 Total liabilities and equity $6,515,000Consider a project of the Charlie Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: CFO -$990; C01-$125, C02-$250; C03-$375; C04-$500 The firm's tax rate is 21 percent; the firm's bonds trade with a yield to maturity of 8 percent; the current and target debt-equity ratio is 2; if the firm were financed entirely with equity, the required return would be 10 percent. Using the weighted average cost of capital methodology, what is the NPV? Hint: use r_L=r_u + (D/E)(r_u - r_d)(1-t), and then find WACC. -10.6854 10.6854 O -7.5674 O 7.5674 Question 7 Use the data from Q6, what is the levered incremental cash flow for year 2? Hint, first find original debt level, and find tax saving. O $250.000m $208.288m $225.768m $235.614m
- (Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.1 percent. Interest payments are $50.50 and are paid semiannually. The bonds have a current market value of $1,122 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.85 dividend last year. The firm's dividends are expected to continue to grow at 7.8 percent per year, forever. The price of the firm's common stock is now $27.25. c. A preferred stock that sells for $150, pays a dividend of 8.8 percent, and has a $100 par value. d. A bond selling to yield 11.8 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is %. (Round to two decimal places.)(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.9 percent. Interest payments are $54.50 and are paid semiannually. The bonds have a current market value of $1,121 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 6.8 percent per year, forever. The price of the firm's common stock is now $27.84 c. A preferred stock that sells for $144, pays a dividend of 8.6 percent, and has a $100 par value. d. A bond selling to yield 12.3 percent where the firm's tax rate is 34 percent.(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.3 percent. Interest payments are $56.50 and are paid semiannually. The bonds have a current market value of $1,126 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. Anew common stock issue that paid a $1.75 dividend last year. The firm's dividends are expected to continue to grow at 6.7 percent per year, forever. The price of the firm's common stock is now $27.72. c. A preferred stock that sells for $122, pays a dividend of 8.1 percent, and has a $100 par value. d. A bond selling to yield 11.2 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is %. (Round to two decimal places.)
- (Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.0 percent. Interest payments are $55.00 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percent.b. A new common stock issue that paid a $1.80 dividend last year. The firm's dividends are expected to continue to grow at 7.0 percent per year, forever. The price of the firm's common stock is now $27.50.c. A preferred stock that sells for $125, pays a dividend of 9.0 percent, and has a $100 par value. d. A bond selling to yield 12.0 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is %. (Round to two decimal places.)b. The cost of common equity is %. (Round to two decimal places.)c. The cost of preferred stock is %. (Round to…Give typing answer with explanation and conclusion A company has an expected EBIT of $18,000 in perpetuity, a tax rate of 35%, and a debt-to- equity ratio of 0.75. The interest rate on the debt is 9.5%. The firm’s WACC is 9%. a) If the company has not debt, what would be the unlevered cost of capital and firm value? b) Suppose now the company has $55,714.29 in outstanding debt. Using your answer to part a) and M&M Proposition I with taxes, what is the value of this levered firm?(Individual or component costs of capital) Compute the cost of capital for the firm for the following a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield 8.84 percent while the borrowing firm's corporate tax rate is 34 percent. b. Common stock for a firm that paid a $1.02 dividend last year. The dividends are expected to grow at a rate of 4 1 percent per year into the foreseeable future. The price of this stock is now $25 56, c. A bond that has a $1,000 par value and a coupon interest rate of 11.2 percent with interest paid semiannually. A new issue would sell for $1,151 per bond and mature in 20 years. The firm's tax rate is 34 percent d. A preferred stock paying a dividend of 7.7 percent on a $107 par value. If a new issue is offered, the shares would sell for $84 71 per share a. The after-tax cost of debt debit for the firm is (Round to two decimal places)