Cruz Corporation has $100 billion of debt outstanding. An otherwise identical firm has no debt and...

Cruz Corporation has $100 billion of debt outstanding. An otherwise identical firm has no debt and has a market value of $450 billion. Under the Miller model, what is Cruz’s value if the federal-plus-state corporate tax rate is 28%, the effective personal tax rate on stock is 17%, and the personal tax rate on debt is 29%? Enter your answer in billions. For example, an answer of $1.23 billion should be entered as 1.23, not 1,230,000,000. Round your answer to two decimal places.

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Miller Model with Corporate and Personal Taxes Cruz Corporation has $100 billion of debt outstanding. An...

Miller Model with Corporate and Personal Taxes Cruz Corporation has $100 billion of debt outstanding. An otherwise identical firm has no debt and has a market value of $450 billion. Under the Miller model, what is Cruz’s value if the federal-plus-state corporate tax rate is 28%, the effective personal tax rate on stock is 17%, and the personal tax rate on debt is 29%? Enter your answer in billions. For example, an answer of $1.23 billion should be entered as...

A firm has $9.2 Billion debt outstanding, with a yield to maturity of 5% and a...

A firm has $9.2 Billion debt outstanding, with a yield to maturity of 5% and a coupon rate of 5.8%. They have 198 million preferred shares outstanding, currently trading at $86.6. They also have 747 million common shares outstanding, currently trading at $49.04 and the corporate tax rate is 24%. If the return on common stock (return on equity) is 8.8% and the return on preferred stock is 6.8% what is the Weighted Average Cost of Capital (WACC)?

An unlevered firm has a value of $900 million. An otherwise identical but levered firm has...

An unlevered firm has a value of $900 million. An otherwise identical but levered firm has $70 million in debt at a 4% interest rate, which is its pre-tax cost of debt. Its unlevered cost of equity is 11%. After Year 1, free cash flows and tax savings are expected to grow at a constant rate of 3%. Assuming the corporate tax rate is 25%, use the compressed adjusted present value model to determine the value of the levered firm....

ABC Corporation has $100 million in debt outstanding. The debt has 4 years to maturity and...

ABC Corporation has $100 million in debt outstanding. The debt has 4 years to maturity and a 6% coupon. The debt has a par value of $1,000 per bond and interest is paid semi-annually. The current price of the bond is 105.25 as a percent of par. The company has 10 million of stock outstanding with a market price of $25 per share. The stock has a beta of 1.24 with the market. The company is in the 25% tax...

ABC has $5 billion in debt outstanding (carrying an interest rate of 9%), and 10 million...

ABC has $5 billion in debt outstanding (carrying an interest rate of 9%), and 10 million shares trading at $50 per share. Based on its current EBIT of $ 200 million, its optimal debt ratio is only 30%. The firm has a beta of 1.20, and the current T-bond rate is 7%. Assuming that the operating income will increase 10% a year for the next five years and that the firm's depreciation and capital expenditures both amount to $ 100...

Consider a firm managed by an entrepreneur. The firm has two kinds of debt outstanding: senior...

Consider a firm managed by an entrepreneur. The firm has two kinds of debt outstanding: senior debt under which it owes $150 to bondholders, and a subordinated bank loan that requires a repayment of $1,250. The firm’s assets have a current liquidation value of $400, but if the firm continues to operate, it will be worth $1,400 with probability 0.8 and zero with probability 0.2 one period hence. To manage the firm for an additional period, the entrepreneur incurs a...

1) BigDebt firm and SmallDebt firm are identical except for their level of debt and the...

1) BigDebt firm and SmallDebt firm are identical except for their level of debt and the interest rates they pay on debt-BigDebt has more debt and pays a higher interest on that debt. Based on the data given below, what is the difference between two firms' ROEs? Applicable to Both Firms Assets = $400 EBIT = $100 Tax Rate = 35% Firm BigDebt’s Data Debt Ratio = 45% Interest Rate = 12.5% Firm SmallDebt’s Data Debt Ratio = 25% Interest...

Harris Corporation is an all-equity firm with 100 million shares outstanding. Harris has $250 million in cash...

Harris Corporation is an all-equity firm with 100 million shares outstanding. Harris has $250 million in cash and expects future free cash flows of $85 million per year. Management plans to use the cash to expand the firm’s operations, which will in turn increase future free cash flows by 15%. If the cost of capital of Harris’ investments is 12%, how would a decision to use the cash for a share repurchase rather than the expansion change the share price?

Calculate the cost of debt for a firm that has $10 million inbonds outstanding that...

Calculate the cost of debt for a firm that has $10 million in bonds outstanding that mature in 15 years and have 5% coupon rates. Coupons are paid semiannually. The face value of the bonds is $1000 and the price per bond is $900.

A firm has debt due next year and the amount is 100. It has cash of...

A firm has debt due next year and the amount is 100. It has cash of 10. It has only 1 project to invest. If the project succeeds, it will generate 1000 cash flow next year and 0, otherwise. Probability of success is 5%. Initial cost of project is 10. If the firm does not invest in the project, it will put 10 cash into risk-free asset. Risk-free return is 2%. Discount rate for the project cash flow is 10%....

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