Business Finance Help for College and University Students

Managerial Finance 476 (II)

Discussion Question 1: What impact do changing interest rates have on the price of long-term vs. short –terms bonds? What do you think is happening in the bonds market today? What impact, if any does, does the stock market have on the bond market?

Managerial Finance 476(II)

Discussion Question 2: Companies often buy back stock, known when repurchased as Treasury Stock. What are some of the reasons for a company to buy back their stock from shareholders? What would one financial goal be?

Managerial Finance 476(II)

Discussion Question 3: Do you think leasing is a good way to go when looking at a new car? Why or why not? Why lease when you can own? How is leasing different than renting?

After tax cost of debt: a. If the Goodsmith Charitable Foundation borrowed money this year, what would the after tax cost of debt be, based on their cost last year and the 20 percent increase? b. If the receipts of the Foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the after tax cost of debt be?

3. The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 8 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 20 percent higher; that is, firms that paid 10 percent for debt last year will be paying 12 percent this year. a. If the Goodsmith Charitable F ...continues

Managerial Finance 476(II)

4. Royal Jewelers Inc. has an aftertax cost of debt of 6 percent. With a tax rate of 40 percent, what can you assume the yield on the debt is?

Managerial Finance 476(II)

8. New Jersey Bell Telephone Co. is planning to issue debt that will mature in the year 2024. In many respects the issue is similar to currently outstanding debt of the corporation. Using Table 11-2 on page 304, identify: a. The yield to maturity on similarly outstanding debt for the firm, in terms of maturity. b. Assume t ...continues

Managerial Finance 476(II)

9. The shares of Charles Darwin Fitness Centers sell for $60. The firm has a P/E ratio of 20. Forty percent of earnings are paid out in dividends. What is the firm’s dividend yield?

capital gains tax, tax on dividends

11. Max Johnson owns 200 shares of Newmont Labs, Inc., which he bought for $15 per share. He is in a 33 percent tax bracket. It is the first week in December, and he has already received the full cash dividend for the year of $1.60 per share. The stock is currently selling for $25.50. He has decided to sell the stock and after p ...continues

Managerial Finance 476(II)

2. Calculate the aftertax cost of debt under each of the following conditions. Please see attached for table.

After tax cost of debt

6. Russell Container Corporation has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest payment of $95 and is currently selling for $920 per bond. Russell Corp. is in a 25 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The y ...continues