Donat corp. is a small company looking at two possible capital structures. currently, the firm is an allminusequity firm with $600,000 in assets and 100,000 shares outstanding. the market value of each share is $6.00. the ceo of donat is thinking of leveraging the firm by selling $300,000 of debt financing and retiring 50,000 shares, leaving 50,000 shares outstanding. the cost of debt is 5% annually, and the current corporate tax rate for donat is 30%. the ceo believes that donat will earn $50,000 per year before interest and taxes. which of the statements below is true? a. 50/50 debtminustominusequity eps is $0.49. b. allminusequity eps is $0.35. c. shareholders will be better off by $0.14 per share under a firm with $300,000 in debt financing versus a firm that is allminusequity. d. statements a, b, and c are all true.

2standard deviation a particular telephone number is used to receive both voice calls and fax messages. suppose that 25% of the incoming calls involve fax messages, and consider a sample of 25 incoming calls. (a) what is the expected number of calls among the 25 that involve a fax message?

Cindy recently played in a softball game in which she misplayed a ground ball for an error. later, in the same game, she made a great catch on a very difficult play. according to the self-serving bias, she would attribute her error to and her good catch to her

Afirm's before-tax cost of debt, rd, is the interest rate that the firm must pay on debt. because interest is tax deductible, the relevant cost of debt used to calculate a firm's wacc is the cost of debt, rd (1 – t). the cost of debt is used in calculating the wacc because we are interested in maximizing the value of the firm's stock, and the stock price depends on cash flows. it is important to emphasize that the cost of debt is the interest rate on debt, not debt because our primary concern with the cost of capital is its use in capital budgeting decisions. the rate at which the firm has borrowed in the past is because we need to know the cost of capital. for these reasons, the on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the . the on the company's -term debt is generally used to calculate the cost of debt because more often than not, the capital is being raised to fund -term projects. quantitative problem: 5 years ago, barton industries issued 25-year noncallable, semiannual bonds with a $1,600 face value and a 8% coupon, semiannual payment ($64 payment every 6 months). the bonds currently sell for $845.87. if the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? round your answer to 2 decimal places. do not round intermediate calcu