What is VFed given the expected earnings per share on the S&P 500 is $23.50 and the long-term U.S. bond rate is 4.75 percent?
Answer to relevant QuestionsRocky Mountain Depot just announced its EPS of $4.50. Retention ratio (b) = 0.6. The earnings are expected to grow at 10 percent for one year and then at 5 percent indefinitely. Given that Ke = 17%, what is the market price?What is the ROE indifference point of the two strategies of Arctic Inc. as follows? TC = 30%, Strategy 1: debt-equity ratio = 0.7. Strategy 2: debt-equity ratio = 1.0. Arctic Inc.’s after-tax cost of debt is 10 percent.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?Explain how the static trade-off model can be used to find an optimal capital structure.What important issues does the static trade-off model ignore?
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