HBM, Inc. has the following capital structure: Assets 400,000 Debt $140,000 Preferred stock $20,000 Common stock $240,000 The common stock is currently selling for $15 a share, pays a cash dividend of $0.75 per share, and is growing annually at…
Nico Trading Corporation is considering issuing long-term debt. The debt would have a 30-year maturity and 10 percent coupon rate. In order to sell the issue, the bonds must be underpriced at a discount of 5 percent of face value.…
Porky Pine Co. is issuing a $1,000 par value bond that pays 8.5% interest annually. Investors are expected to pay $1,100 for the 12-year bond. Porky will pay $50 per bond in flotation costs. What is the after-tax cost of…
A firm has outstanding debt with a coupon rate of 9%, nine years maturity, and a price of $1000 per $1000 face value. What is the after-tax cost of debt if the marginal tax rate of the firm is 30%?…
SNL corporation, a C corporation, reports $400,000 of taxable income in the current year, SNL’s tax rate is 35 percent. Answer the following questions, assuming Keegan, SNL’s sole shareholder, has a marginal tax rate of 39.6 percent on ordinary income…
1.Read “Just The Facts”. Review the scenario presented as it relates to the case of Taxman v. Board of Education. Although the school was concerned about diversity and took steps to ensure diversity in the business department, were the steps…
A firm incurs $70,000 in interest expenses each year. If the tax rate of the firm is 20%, what is the effective after-tax interest rate expense for the firm? A) $37,000 B) $49,000 C) $56,000 D) $65,000
In insurance terminology, a warranty is a promise something has happened or exists (affirmative warranty) or something will happen (promissory warranty). Give two examples of promissory and affirmative warranties. What difference does it make to an insured if false statement…
Bobs Bikes Ltd has recently (late 2003) completed a $100,000, two-year marketing study on introducing a new tricycle model. Based on the results of the study, Bobs Bikes expects to sell 1,000 of the new tricycles in 2004 at a…
Carter Corporation’s sales are expected to increase from $5 million in 2008 to $6 million in 2009, or by 20%. Its assets totaled $3 million at the end of 2008. Carter is at full capacity, so its assets must grow…
