Finance Question: Help! – savvyessaywriters.net | Savvy Essay Writers
Finance Question: Help! – savvyessaywriters.net | Savvy Essay Writers
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A firm is all equity financed with 10,000 outstanding shares with a market value of $20 each. Its net income was $30,000 and it decides to pay a cash dividend of $2000. Calculate the value of each share after the dividend payout.a. $22.8b. $20c. $19.8d. not enough informationGrandma’s Applesauce, Inc. has a 0.60 probability of a good year with operating cash flow of $50,000 and 0.40 probability of a bad year with operating cash flow of $30,000. The company has a debt of $35,000 with 8 percent interest due next year. Assuming the company has no means of servicing its debt other than operations, and a 0% tax rate, which of the following is true?a. Shareholders expected claim is $12,200b. Creditors expected claim is $37,800c. Creditors expected claim is $35, 680d. None of the aboveThe owners of a firm facing a high probability of bankruptcy prefer to invest in ____ projects, because ____.a. safer; riskier projects make bankruptcy more likelyb. no new; the firm is likely to go bankrupt anywayc. risky; the shareholders have little to lose and might win if successfuld. risky; creditors prefer taking a gamble rather than having the company defaultYou are trying to decide whether to accept or reject a one-year project. The project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate, the after-tax incremental cash flow is:a. $2,990b. $3,190c. $3,250d. $3,510What is the present value of a growing perpetuity that makes a paymet of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.a. 2,000b. 3,500c. 2,500d. 4,000
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