Monthly Archives: May 2012

Parker Investments has EBIT of $20,000, interest expense of $3,000, and preferred dividends of $4,000

E13-4 Parker Investments has EBIT of $20,000, interest expense of $3,000, and preferred dividends of $4,000. If it pays taxes at a rate of 38%, what is Parker’s degree of financial leverage (DFL) at a base level of EBIT of … Continue reading

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Chico’s has sales of 15,000 units at a price of $20 per unit. The firm incurs fixed operating costs of $30,000 and variable operating costs of $12 per unit

E13-3 Chico’s has sales of 15,000 units at a price of $20 per unit. The firm incurs fixed operating costs of $30,000 and variable operating costs of $12 per unit. What is Chico’s degree of operating leverage (DOL) at a … Continue reading

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The Great Fish Taco Corporation currently has fixed operating costs of $15,000, sells its premade tacos for $6 per box, and incurs variable operating costs of $2.50 per box

E13-2 The Great Fish Taco Corporation currently has fixed operating costs of $15,000, sells its premade tacos for $6 per box, and incurs variable operating costs of $2.50 per box. If the firm has a potential investment that would simultaneously … Continue reading

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(Nonconstant Growth Valuation) A company currently pays a dividend of $2 per share (D0 = $2)

Nonconstant Growth Valuation A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a … Continue reading

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Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries

Nomar Industries, Inc. operates in several lines of business, including the construction and real estate industries. While the majority of its revenues are recognized at point of sale, Nomar appropriately recognizes revenue long-term construction contracts using the percentage-complete method. It … Continue reading

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6-3 (Required rate of return using CAPM) a. Compute a fair rate of return for Intel common stock, which has a 1.2 beta

Study Problem 6-3 6-3. (Required rate of return using CAPM) a. Compute a fair rate of return for Intel common stock, which has a 1.2 beta. The risk-free rate is 6 percent, and the market portfolio (New York Stock Exchange … Continue reading

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5-6. (Present value of an annuity) What is the present value of the following annuities

Study Problem 5-6 5-6. (Present value of an annuity) What is the present value of the following annuities? a. $2,500 a year for 10 years discounted back to the present at 7 percent b. $70 a year for 3 years … Continue reading

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Given the information below, compute annualized returns

1. Given the information below, compute annualized returns Asset Income Price change Initial price Time period A $2 $6 $29 15 months B 0 10 40 11months C 50 70 30 7 years D 3 -8 20 24 month 2. … Continue reading

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Suppose rFr=9%, rM=14% and bi=1.3

Suppose rFr=9%, rM=14% and bi=1.3. a). What is ri, the required rate of return on Stock i? b). Now suppose rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this … Continue reading

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You are the president and chief executive officer of a family owned manufacturing firm with assets of $45 million

You are the president and chief executive officer of a family owned manufacturing firm with assets of $45 million. The company articles of incorporation and state law place no restrictions on the sale stock to outsiders. An unexpected opportunity to … Continue reading

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