Morton company is considering opening a new subsidiary in, Ask an Expert

Finance

problem: Morton Company is considering opening a new subsidiary in Boston, to b operated as a separate firm. The firm's financial analysts expect the company is considering the following two (2) financing plans. Suppose marginal tax rate is 40%.

1st Plan [Equity financing]; Under this plan, 2 million common shares will be sold at $10 each.

2nd Plan [Debt equity financing]; Under this plan, $10 million of 12 percent long-term debt and 1 million common shares at $10 each will be sold.

Assume Morton adopts Plan 2nd, and the Boston facility initially operates at an annual EBIT level of $6 million. find out the time interest earned ratio?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M921346

Have any Question?Write your Review or question?

Related Questions in Basic Finance

An all-equiry business has 175m shares outstanding selling

An all-equiry business has 175M shares outstanding selling for $20/share. Management believes interest rates are unreasonably low and decides to execute a leveraged recapitalization. It will raise $1B in debt and repurch ...

Question - bowdeen manufacturing intends to issue callable

Question - Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,270. One-year interest rates are 11 percent. There is a 60 percent probability that lo ...

How to figure out the profit loss of a company what

How to figure out the profit loss of a company, what evidence would show that and what would be some solutions that can help a company detour from profit loss?

Rippards has a debt ratio of 15 a total asset turnover

Rippard's has a debt ratio of 15%, a total asset turnover ratio of 3.0 and a return on equity (ROE) of 48%. Compute Rippard's net profit margin.

How do you calculate g the growth rate of dividends using

How do you calculate g, the growth rate of dividends, using the following variables? g=growth rate of future earnings and the growth in the common stockholders' investment in the firm ROE=the return on equity (net income ...

Under what circumstances will the irr and npv rules lead to

Under what circumstances will the IRR and NPV rules lead to the same decision (accept/reject)? When might they conflict?

The ola company issued bonds at 1025 in 1000 increments you

The Ola company issued bonds at 10.25% in $1,000 increments. You invested. The bonds are currently trading at 9.5% in the open market wit 8 years left. Calculate the present value of your investment.

Fools gold jewelry has just paid a stock dividend of 150

Fools Gold Jewelry has just paid a stock dividend of $1.50. Over the next 3 years, Fools Gold plans to increase their dividend by 10% each year. Beginning in year 4 Fools Gold will decrease their dividend to 5% growth fo ...

Craigs cake company has an outstanding issue of 15-year

Craig's Cake Company has an outstanding issue of 15-year convertible bonds with a $1,000 par value. These bonds are convertible into 80 shares of common stock. They have a 13% annual coupon interest rate, whereas the int ...

The quarterly payment on a 10-year loan is 186750 the loans

The quarterly payment on a 10-year loan is $1867.50. The loan's interest rate is a 5.1% annual percentage rate (APR) and payments are end-of-quarter. (a) What is the loan amount? (b) What is the loan's effective annual r ...

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

Recent Questions

Ask Basic Finance Expert