Use two different methods to calculate ROI given the following information for Brandon Corp. Sales = $500,000; Cost of goods sold = $100,000; Interest cost $22,500; TC = 40%. The firm’s debt (B = $300,000) accounts for 25 percent of the invested capital. After-tax cost of debt is 4.5 percent.
Answer to relevant QuestionsCalculate the fixed burden coverage and cash-flow-to-debt ratio given the following: EBIT = $700,000; depreciation and amortization = $60,000; preferred dividend $50,000; sinking fund payments = $10,000; tax rate = 20%; debt ...In the M&M no-tax world, calculate the value of the levered firm (VL). Cost of unlevered equity (KU) = 15%; cost of debt (KD) = 7%; debt (D) = $400,000; and NI = $520,000. What is the cost of levered equity?Straightforward Theatre Company has an EBIT of $1 million per year. The WACC of the firm is 10 percent and the before-tax cost of debt is 4 percent. The debt is risk free and all cash flows are perpetual. The current D/E ...State the two rules of financial leverage.A firm has one million shares outstanding. After-tax earnings have been constant at $10 per share. The firm pays out all earnings in dividends at the end of each year. The shareholders’ required rate of return is 15 ...
Post your question