Steinberg corporation and dietrich corporation are identical firms except that dietrich is more levered. both companies will remain in business for one more year. the companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year, and the probability of a recession is 30 percent. if the expansion continues, each firm will generate earnings before interest and taxes (ebit) of $4.6 million. if a recession occurs, each firm will generate earnings before interest and taxes (ebit) of $1.4 million. steinberg's debt obligation requires the firm to pay $1,000,000 at the end of the year. dietrich's debt obligation requires the firm to pay $1.5 million at the end of the year. neither firm pays taxes. assume a discount rate of 12 percent. what are the current market values of steinberg's equity and debt? what are the current market values of dietrich's equity and debt? steinberg's ceo recently stated that steinberg's value should be higher than dietrich's because the firm has less debt, and, therefore, less bankruptcy risk. do you agree or disagree with this statement?
Answers: 2
Business, 22.06.2019 02:20
The following information is available for jase company: market price per share of common stock $25.00 earnings per share on common stock $1.25 which of the following statements is correct? a. the price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. b. the market price per share and the earnings per share are not statistically related to each other. c. the price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year. d. the price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year.
Answers: 1
Business, 22.06.2019 14:00
Wallace company provides the following data for next year: month budgeted sales january $120,000 february 108,000 march 140,000 april 147,000 the gross profit rate is 35% of sales. inventory at the end of december is $29,600 and target ending inventory levels are 10% of next month's sales, stated at cost. what is the amount of purchases budgeted for january?
Answers: 1
Business, 22.06.2019 20:00
Experienced problem solvers always consider both the value and units of their answer to a problem. why?
Answers: 3
Steinberg corporation and dietrich corporation are identical firms except that dietrich is more leve...
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