Masters Level Finance- Financing and Valuation Assignment

Hello! I need help with my finance assignment of financing and valuation. It’s a pretty short assignment. The answer block with a C requires calculations to be shown and T only requires a text answer. I need the assignment done by 10/29/12.  

Instructions

o complete the homework assignments in the templates provided:

requires a calculation. You cannot perform the operation on a calculator and then type the answer in the cell. You will enter the calculation in the cell, and only the final answer will show in the cell. I will be able to review your calculation and correct, if necessary.

requires a number only. In some problems, a “Step 1” is added to help you solve the problem.

NAME:

T

1.

The question is provided for each problem. You may need to refer to your textbook for additional information in a few cases.

2.

You will enter the required information into the shaded cells.

3.

The cells are coded:

a.

T requires a text answer.

b.

C

c.

F

4.

Name your assignment file as “lastnamefirstinitial-FINC600-Week#”, and submit by midnight ET, Day 7.

&C&”Calibri,Regular”&16Instructions
&C&”Calibri,Regular”&11Principles of Corporate Finance, Concise, 2nd Edition

P14-2

F

a.

F

b.

F

T C

T C

F

Problem 14-2
Assume that MM’s theory holds with taxes. There is no growth, and the $40 of debt is expected to be permanent. Assume a 40% corporate tax rate. a. How much of the firm’s value is accounted for by the debt-generated tax shield? b. How much better off will UF’s a shareholder be if the firm borrows $20 more and uses it to repurchase stock?
		Answer:
Step 1:
Tax rate – Tc
Permanent Debt – D
Additional Debt – D
Step 2:
Formula		Calculation
a. Tax shield
b. Tax shield
Benefit to Shareholders	TIP: difference between a and b

&L&”Calibri,Regular”&11Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.
&C&”Calibri,Regular”&11Principles of Corporate Finance, Concise, 2nd Edition

P14-24

Answer:

Problem 14-24

Some companies’ debt-equity targets are expressed not as a debt ratio, but as a target debt rating on a firm’s outstanding bonds. What are the pros and cons of setting a target rating, rather than a target ratio?

Pros T

Cons T

&L&”Calibri,Regular”&11Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.

P15-6

Calculation
a.

C

b.

C

Problem 15-6

A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). What is the project’s APV in the following cases? a. If the firm invests, it has to raise $500,000 by a stock issue. Issue costs are 15% of net proceeds. b. If the firm invests, its debt capacity increases by $500,000. The present value of interest tax shields on this debt is $76,000.

Answers:

APV stock issue

APV debt increases

&L&”Calibri,Regular”&11Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.
&C&”Calibri,Regular”&11Principles of Corporate Finance, Concise, 2nd Edition

P15-9

Answer:

T

Problem 15-9

The WACC formula seems to imply that debt is “cheaper” than equity–that is, that a firm with more debt could use a lower discount rate. Does this make sense? Explain briefly.

&L&”Calibri,Regular”&11Instructions: Please refer to your book for assistance with your homework. Post your work in the worksheet. Highlight your final answer.