Intermediate Finance Midterm Winter 2010 - 758 Words

UNIVERSITY OF TORONTO at Scarborough Management MGTC09 (Intermediate Finance) Midterm Exam Total Marks: 100 ASSIGNMENT 1 Date: February 24, 2010 Time: 5:10-7 p.m. Due Date : June 3, 2010 by 11 am Prof. Syed W. Ahmed QUESTION NO. MAX. MARKS MARKS OBTAINED 1 20 __________________ 2 25 __________________ 3 25 __________________ 4 30 __________________ 100 __________________ TOTAL MARKS QUESTION 1: Ellesmere International has 1 million shares of common stock outstanding. The current share price is $25 per share. The most recent dividend was $1 and the growth rate is 5%. Ellesmere also has a bond issue outstanding, which is maturing in 25 years, has a face value of†¦show more content†¦It wants to know if replacing some of the existing equity by issuing more debt will increase the value of the firm. If leverage increases, interest rate on the total debt will increase. The Company is considering the following total debt levels. Total Debt Cost of Cost of (in millions) debt (%) equity (%) $7.5 7 10.5 $10 8 12.5 a. Determine the value of the firm at the above debt levels. What level of debt should the firm choose? b. Calculate the new equilibrium stock prices at the above debt levels. How many shares company should repurchase? How many shares will remain outstanding? c. Determine the firm’s EPS at the above debt levels. If EPS goes up with the higher debt level, should the firm increases its total debt level? QUESTION 4: Usman Aeronautica Limited (UAL) is considering replacing the old widget maker with a new one at their widget making plant in Sudbury. The old widget maker has a current market value of $1,000,000. The new widget maker will generate incremental pre tax cash flow of $2,000,000 per year for 10 years and will have zero salvage value after 10 years of use. The widget maker will be depreciated straight line. UAL is in 40% tax bracket, it has debt/equity ratio of 1, cost of debt of 8%, and cost of equity of 15%. Treasury bills are yielding 3% rate of return. a. What is the maximum price XYZ should be willing to pay for the widget maker if it is allShow MoreRelatedEssay on Culminating Project for RDG 5438982 Words   |  36 PagesMicrosoft Office on them, rendering them just about useless for my class. PART TWO: ASSESSMENT PLAN Formal Assessment related to instruction plan: The North Carolina Department of Public Instruction (DPI), has created unit quizzes, benchmark, midterm and final exams in our Career and Technical Education testing software named Thinkgate. Unit 2.09 is the lesson on Animations in PowerPoint. All quizzes and tests are kept on a secure server. Students have access to the formal assessment when theirRead MoreFundamentals of Hrm263904 Words   |  1056 PagesEudenbach/Getty Images, Inc. This book was set in 10/12 ITC Legacy Serif Book by Aptaracorp, Inc. and printed and bound by Courier/Kendallville. The cover was printed by Courier/Kendallville. This book is printed on acid free paper. Copyright  © 2010, 2007, 2005, 2002 John Wiley Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwiseRead More_x000C_Introduction to Statistics and Data Analysis355457 Words   |  1422 Pageson a study of the effectiveness of a new ï ¬â€šu vaccine that is administered by nasal spray rather than by injection. The article states that the â€Å"researchers gave the spray to 1070 healthy children, 15 months to 6 years old, before the ï ¬â€šu season two winters ago. One percent developed conï ¬ rmed inï ¬â€šuenza, compared with 18 percent of the 532 children who received a placebo. And only one vaccinated child d eveloped an ear infection after coming down with inï ¬â€šuenza. . . . Typically 30 percent to 40 percent of