A firm has EBIT of R375,000, interest expense of R75,000, preferred dividends of R6,000 and a tax rate of 40 percent. At a base EBIT level of R375,000, what is the firm's degree of financial leverage.
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| A firm has EBIT of R375,000, interest expense of R75,000, preferred | ||
| dividends of R6,000 and a tax rate of 40 percent. At a base EBIT level of R375,000, | ||
| what is the firm's degree of financial leverage. (1) |
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- You are analysing NBM firm and obtained the following information: FCFF reported as R198 million, interest expense is R15 million. If the tax rate is 35% and the net debt of the firm increased by R20 million, what is the approximate market value of the firm if the FCFE grows at 3% and the cost of equity is 14%? R1,950 billion R2,497 billion R2,585 billion R3,098 billion R 1,893 billionA firm has EBIT of $20,800,000.00, total assets of $100,000,000.00, a tax rate of 40 percent, a cost of debt of 8.0 percent, and a debt/equity ratio of 1.00. As discussed in class, the ROE for a levered firm is also a function of a firm's return on assets (ROA) for an equivalent unlevered firm, plus a leverage effect, plus a tax shelter effect. Given the information above, determine what percentage of the firm's total return on equity arises from the tax shelter effect. Enter your answer is decimal format, rounded to three decimal places. For example, if your answer is 46.55%, enter "0.466".A firm has EBIT of $15,800,000.00, total assets of $100,000,000.00, a tax rate of 40 percent, a cost of debt of 8.0 percent, and a debt/equity ratio of 1.00. As discussed in class, the ROE for a levered firm is also a function of a firm's return on assets (ROA) for an equivalent unlevered firm, plus a leverage effect, plus a tax shelter effect. Given the information above, determine what percentage of the firm's total return on equity arises from the tax shelter effect.
- 1. An unlevered firm has a value of R600 million. An otherwise identical but levered firm has R240 million in debt. Under the Miller model, what is the value of the levered firm if the corporate tax rate is 34%, the personal tax rate on equity is 10%, and the personal tax rate on debt is 35%?A firm has a tax burden ratio of .75, a leverage ratio of 1.25, an interest burden of .6, and a return on sales of 10%. The firm generates $2.40 in sales per dollar of assets. What is the firm’s ROE?Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95 billion, and an enterprise value of $15 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.9% and its marginal tax rate is 38%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here,? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 FCF ($ million) - 100 50 Print C Done 2 99 3 66 X
- Suppose Alcatel-Lucent has an equity cost of capital of 10.4%, market capitalization of $11.52 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.6% and its marginal tax rate is 34%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, ? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is 9.34 %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 FCF ($ million) 45 Print 0 - 100 Done 2 101 3 66 - XA firm has a tax burden ratio of 0.85, a leverage ratio of 1.5, an interest burden of 0.9, and a return on sales of 12%. The firm generates $2 in sales per dollar of assets. What is the firm's ROE? (Do not round intermediate calculations. Round your answer to 2 decimal place.) ROE %A firm has a tax burden of 0.7. a leverage ratio of 1.3, an interest burden of .8, and a return-on-sales ratio of 10%. The firm generates $2.78 in sales per dollar of assets. What is the firm's ROE? A. 16.6% B. 12.4% C. 14.5% D. 20.2%
- A firm has EBIT of $7.5 million, a 33% tax rate, a weighted average cost of capital of 8.95% and total capital (long-term debt and equity) of $55 million. What is their economic value added (EVA)? $102,500 $112,667 $165,500 $3,264,250Give typing answer with explanation and conclusion Suppose Abraxas Corp. has an equity cost of capital of 8.2%, market capitalization of $11.37 billion, and an enterprise value of $17.12 billion. Suppose Abraxas's debt cost of capital is 5.6% and its marginal tax rate is 21%. What is Abraxas's WACC?Suppose a firm pays total dividends of $35,000 out of net income of $200,000. What would the firm's payout ratio be?