Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

Task1. Trevor Price bought 10-year bonds issued by the Harvest Foods 5 years ago for $986.61. The bonds make semi-annual coupon payments at a rate of 8.4 percent. When the current price of the bonds is $1,063.49, what is yield that Trevor would earn by selling the bonds today?

Task2. The Pettit Corporation has annual credit sales of $2 million. Current expenditures for the collection department are $30,000, bad debt losses are 2% and the day’s sales outstanding are 30 days. Pettit is considering easing its collection efforts so that collection expenditures will be reduced to $22,000 per year. The change is expected to raise bad debt losses to 3% and to raise the DSO to 45 days. In addition, sales are anticipated to rise to $2.2 million per year. Should Pettit relax collection efforts when the opportunity cost of funds is 12%, the variable cost ratio is 75% and its marginal tax rate is 40%? All costs associated with production and credit sales are paid on day of the sale.

Task3. Suppose that Firms U and L are in the same risk class and that both have EBIT = $500,000. Firm U uses no debt financing, and its cost of the equity is rsu = 14%. Firm L has $1 million of debt outstanding at a cost rd =8%. There are no taxes. Suppose that the MM (Miller and Modigliani) assumptions hold.

1. Find out V, S, rs, and WACC for Firms U and L.

2. Graph (a) the relationships between capital costs and leverage as evaluated by D/V and (b) the relationship between V and D.

Now suppose that Firms L and U are both subject to a 40% corporate tax rate. Using the data given repeat the analysis called for in (1) and (2) under MM model with taxes.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M94262

Have any Question? 


Related Questions in Financial Accounting

A company invests 1000000 at the beginning of the year it

A company invests $1,000,000 at the beginning of the year. It adds another $250,000 at the end of the first quarter, withdraws $350,000 at the end of the second quarter, adds $145,000 at the end of the third quarter, and ...

The payroll register of longboat co indicates 5400 of

The payroll register of Longboat Co. indicates $5,400 of social security withheld and $1,350 of Medicare tax withheld on total salaries of $90,000 for the period. Earnings of $10,000 are subject to state and federal unem ...

Sothern asia ltd leased cars from a finance company a

Sothern Asia Ltd leased cars from a finance company. a noncancellable contract for 4 years term and started on 1st January 2013. The annual rentals are $25,000 and are made on 1 st January each year with the first rental ...

Consider the following case studyyou are the chief

Consider the following case study: You are the chief executive officer of a large, technology-intensive hospital in a community of 200,000 people. The community includes two other, smaller community hospitals and a wide ...

Laurarsquos dress delivery operates a mail-order business

Laura’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $620,000 in December. Because Laura’s Dress Delivery is in the mail-order business, all sales are ...

Financial accounting assignment-problem - on 1 july 2011

Financial Accounting Assignment- Problem - On 1 July 2011, Parent Ltd acquired 100% of the share capital of Son Ltd for $ 1,000,000. At that time, the equity of Son Ltd consisted of: Share capital $ 600,000 General reser ...

Find the financial statements for a publicly traded company

Find the financial statements for a publicly traded company, and examine its balance sheet and income statement. Prepare an overview (approximately 300 words) of what is revealed about the company by its balance sheet an ...

Have you been involved in an acquisition either as the

Have you been involved in an acquisition either as the company sold or purchased? Or are you somewhat familiar with a specific acquisition of a company that was either sold or purchased? Was it a good acquisition in term ...

Brighton corp bought an oil rig exactly 6 years ago for

Brighton Corp. bought an oil rig exactly 6 years ago for $113,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. (Straight line depreciation means that the yearly depreciation w ...

Accumulated depreciation 700 beginning inventory 5000

Accumulated depreciation $700, Beginning inventory $5,000, Common Stock $50, Retained earnings $900, Ending inventory $1,700, Operating expenses $1,450, Purchaes $3,900, Sales $9,500, Dividends $1,600 What is the gross p ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate