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b.
%?

Should the company accept or reject it using a discount rate of 14

c.
%?

Should the company accept or reject it using a discount rate of 21

P16-5 (similar to)
Break-even EBIT (with and without taxes).
Alpha Company is
looking at two different capital structures, one an all-equity firm and the
other a levered firm with $4.8 million of debt financing at 7% interest.
The all-equity firm will have a value of $8 million and 400,000 shares
outstanding. The levered firm will have 160,000 160,000 shares
outstanding.
a.
Find the break-even EBIT for Alpha Company using EPS if there
are no corporate taxes.
b.
Find the break-even EBIT for Alpha Company using EPS if the
corporate tax rate is 15%.
c.
What do you notice about these two break-even EBITs for Alpha
Company?
P7-1 (similar to)
Anderson Motors, Inc. has just set the company dividend policy at $0.85
per year. The company plans to be in business forever. What is the
price of this stock if
a.

an investor wants a return of 4%?

b.

an investor wants a return of 7%?