Questions from Corporate Finance

Q: You are the owner of a small hardware store, and you

You are the owner of a small hardware store, and you are considering opening a gardening store in a vacant area in the back of your present store. You estimate that it will cost you $50,000 to set u...

Q: The following regression was run using all NYSE firms in 1995

The following regression was run using all NYSE firms in 1995 YIELD = 0.0478 − 0.0157 BETA + 0.0000008 MKTCAP + 0.006797 DBTRATIO + 0.0002 ROE − 0.09 NCEX∕TA R 2 = 12.88% Where BET...

Q: In the illustration in Problem 25, what would the tax rate

In the illustration in Problem 25, what would the tax rate on equity income need to be for debt to not have an effect on value?  

Q: Cello is a manufacturer of pianos. It earned an after-

Cello is a manufacturer of pianos. It earned an after-tax return on capital of 10% last year and expects to maintain this return next year. If the current year’s after-tax operating income is...

Q: Assume you have all your wealth (a million dollars) invested

Assume you have all your wealth (a million dollars) invested in the Vanguard 500 index fund, and that you expect to earn an annual return of 12%, with a standard deviation in returns of 25%. Since y...

Q: If Consolidated Power is priced at $50.00 with dividend

If Consolidated Power is priced at $50.00 with dividend, and its price falls to $46.50 when a dividend of $5.00 is paid, what is the implied marginal rate of personal taxes for its stockholders? Ass...

Q: Assume in the previous question with Vernon Enterprises that the firm will

Assume in the previous question with Vernon Enterprises that the firm will earn a return on capital of 15% in perpetuity. a. Assume that the firm is in stable growth, growing 5% a year forever; est...

Q: Lube Oil, a chain of automobile service stations, reports net

Lube Oil, a chain of automobile service stations, reports net income of $100 million after depreciation of $50 million. The firm has capital expenditures of $80 mil- lion, and the noncash working capi...

Q: Southern Rail has just declared a dividend of $1. The

Southern Rail has just declared a dividend of $1. The average investor in Southern Rail faces an ordinary tax rate of 50%. Although the capital gains rate is also 50%, it is believed that the investor...

Q: LMN Corporation, a real estate company, is planning to pay

LMN Corporation, a real estate company, is planning to pay a dividend of $0.50 per share. Most of the investors in LMN are other corporations that pay 40% of their ordinary income and 28% of their cap...