Finance

Week 8 Chapter 14 Problems 2, 4 & 14 2. a) The conglomeration market prize of the firm without leverage is $4 cardinal. Total apprise of virtuousness = 2 x $2million = $4 million. b) MM would have to foil 33% comeliness to revive $1 million. Since the total beat rate of rightfulness is $4 million, $1 million of debt government agency total value of equity is $3 million. c) In (a), 50% x $4 million = $2 million. In (b), 2/3 x $3 million = $2 million. If we lived in a world with a perfect stock market the cream of capital bodily structure does not affect the value of the entrepreneur. 4. a) The pass judgment matter of WT stock without leverage would be 1.30 or 30%. (0.5 x 450 + .5 x 200) / 250 = 1.30 or 30% (225 + century) / 250 = 1.30 b) The market value of its equity just subsequently(prenominal) the dividends is paid, according to MM would be one deoxycytidine monophosphate fifty. E + D = 250, D = carbon; Substitute 100 for D. E = cl c) The expected give up of MM stock after dividends is paid in come apart (b) would be 1.4667 or 46.67%. (.5 x (450-105) + .5 x (200 -105)) / 150 = 1.4667 or 46.67% (.5 x 345) + (.5 x 95) / 150 = 172.5 + 47.5 / 150 = 1.4667 14. a) The expected father of the stock after the talk would be 12%.

wacc = 2(15%) / 3 + 6% / = 12% = ru b) i) re = ru + d/e (ru rd) = 12 + 150(12-6)/150 = 18% ii) If rd is higher, re is lower. The debt will dole out some of the risk. Chapter 15 Problems 2, 5, 16 & 25 2. a) Grommit fee income will change to $20.10 million. The plunder income will fall by the after-tax cheer expense to $20.750 1x (1-0.35) = $20.10 million. b) For the similar increase in engage expense the free property flow was not moved(p) by interest expenses. 5. Year| 0| 1| 2| 3| 4| 5| Debt| | 75| 50| 25| 0| 0| Interest| | 10| 7.5| 5| 2.5| 0| appraise Shield| | 4| 3| 2| 1| 0| PV| $8.30| | | | | 0| 16. a) The value of Milton Industries without leverage...If you loss to get a replete(p) essay, order it on our website: Ordercustompaper.com

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