Assume in part d of problem 10 that the firm had a sinking fund payment obligation of $200. How much before-tax income is required to cover the sinking-fund obligation? Would lower tax rates increase or decrease the before-tax income required to cover the sinking fund?
Answer to relevant QuestionsIn problem 10, if total debt were increased to 50 percent of assets and interest payments went up by $300, what would be the new value for return on equity? Sarah Bailey is analyzing two stocks in the semiconductor industry. It is her intention to assign a P/E of 16 to the average firm in the industry. However, she will assign a 20 percent premium to the P/E of a company that ...In the year 2010, the average firm in the S&P 500 Index had a total market value of fives times stockholders’ equity (book value). Assume a firm had total assets of $10 million, total debt of $6 million, and net income of ...What are some reasons a firm may repurchase its own stock? Suggest some studies that would indicate the market is not completely efficient in the semistrong form.
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