A firm is making a payment of $1000 to its investors. The firm is in the 35% marginal tax bracket. If this payment is made in the form of dividends to its shareholders, how much does the firm have to have in earnings to be able to make the payment? Round your answer to the nearest dollar. Group of answer choices None of them 1,444 1,350 1,538
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Firm have to make payments to investors as a return. Firm pays to investors after deduction if tax.
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- Suppose a firm pays total dividends of $420,000 out of net income of $3.7 million. What would the firm's payout ratio be? Multiple Choice .42 .114 1.14 8.810Choose the correct letter of answer: The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration? a. 1.6b. 2.6c. 3.6d. 4.6e. 5.6Choose the correct letter of answer and provide a solution A firm has profit before tax of P63 million. If the company's times interest covered ratio is 8 times, what is the total interest charge? a. P3 Millionb. P6 Millionc. P9 Milliond. P12 Millione. P15 Million
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- Calculate the cost of equity: Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table. Table 1: Information of the firms Unlevered firm Levered firm EBIT 10,000 10,000 Interest 0 3,200 Taxable income 10,000 6,800 Tax (tax rate: 34%) 3,400 2,312 Net income 6,600 4,488 CFFA 0 -3,200 Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5 Fill in the blanks What is the present value of the tax shield? Cost of Capital = (10% x 0.5) + (8% x 0.5 x (1-0.34) = 7.64% PV of Tax Shield = (3,200 x 0.34) / (1+0.0764) = 1,010.78 What is the size of debt? Interest / Cost of Debt (3,200 / 8%) = 40,000 Calculate the following values:a) Value of Unlevered Firm 10,000 x (1-34%) / 10% 6,600 / 10% = 66,000 b) Value of the Levered Firm 66,000 + 34% x 40,000 66,000 + 13,600 = 79,600 c) Equity Value…Consider a firm that has 15% of debt. The rate of return for debt is 6% and the rate of return for equity is 12%. The corporate tax rate is 40%. What is the weighted average cost of capital? Enter your answer as a percentage and rounded to 2 DECIMAL PLACES. Do not include the percentage sign in your answer. Enter your response below. %You have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwards
- Suppose Tool Corp. is an unleveraged firm. It has an expected EBIT of 67,000 in Perpetuity and a tax rate of 35%. Its cost of equity is 10.25%. What is Tool Corp’s firm value? (SHOW YOUR WORK)A company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $2.45; P0 = $28.96; and g = 4.06% (constant). What is the cost of equity from retained earnings? Do not round your intermediate calculations. Express your answer as a percent rounded to two decimal places.An all equity firm announces that it is going to borrow $11 million in debt and then keep that debt at a constant value relative to the overall value of the company. What would be the appropriate discount rate for the expected interest tax shields generated by this additional debt? A. Required return on debt B. Required return on equity C. Required return on Assets D. WACC