Tom Scott is the owner, president, and primary salesperson for
Scott Manufacturing. Because of this, the company's profits are
driven by the amount of work Tom does. If he works 40 hours each
week, the company's EBIT will be $560,000 per year; if he works a
50-hour week, the company's EBIT will be $645,000 per year. The
company is currently worth $3.30 million. The company needs a cash
infusion of $1.40 million, and it can issue equity or issue debt
with an interest rate of 8 percent. Assume there are no corporate
taxes.
a. What are the cash flows to Tom under each
scenario? (Enter your answers in dollars, not millions of
dollars, e.g. 1,234,567. Do not round intermediate
calculations.)
Scenario-1
Debt issue:
Cash flows |
|
40-hour week |
$ |
50-hour week |
$ |
Scenario-2
Equity issue:
Cash flows |
|
40-hour week |
$ |
50-hour week |
$ |
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $630,000 per year; if he works a 50-hour week, the company's EBIT will be $785,000 per year. The company is currently worth $4.00 million. The company needs a cash infusion of $2.10 million, and it can issue equity or issue debt...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $600,000 per year, if he works a 50-hour week, the company's EBIT will be $725,000 per year. The company is currently worth $3.7 million. The company needs a cash infusion of $1.8 million, and it can issue equity or issue debt...
0.5 points Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $560,000 per year, if he works a 50-hour week, the company's EBIT will be $645,000 per year. The company is currently worth $3.3 million. The company needs a cash Infusion of $1.4 million and can Issue equity or Issue...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $620,000 per year; if he works a 50-hour week, the company's EBIT will be $765,000 per year. The company is currently worth $3.9 million. The company needs a cash infusion of $2 million and can issue equity or issue debt with...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $565,000 per year; if he works a 50-hour week, the company's EBIT will be $655,000 per year. The company is currently worth $3.35 million. The company needs a cash infusion of $1.45 million, and it can issue equity or issue debt...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $590,000 per year, if he works a 50-hour week, the company's EBIT will be $705,000 per year. The company is currently worth $3.6 million. The company needs a cash infusion of $1.7 million and can issue equity or issue debt with...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $620,000 per year; if he works a 50-hour week, the company's EBIT will be $765,000 per year. The company is currently worth $3.9 million. The company needs a cash infusion of $2 million and can issue equity or issue debt with...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $590,000 per year; if he works a 50-hour week, the company's EBIT will be $705,000 per year. The company is currently worth $3.6 million. The company needs a cash infusion of $1.7 million and can issue equity or issue debt with...
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $605,000 per year; if he works a 50-hour week, the company's EBIT will be $735,000 per year. The company is currently worth $3.75 million. The company needs a cash infusion of $1.85 million, and it can issue equity or issue debt...
National Electric Company (NEC) is considering a $45.07 million project in its power systems division. Tom Edison, the company’s chief financial officer, has evaluated the project and determined that the project’s unlevered cash flows will be $3.17 million per year in perpetuity. Mr. Edison has devised two possibilities for raising the initial investment: Issuing 10-year bonds or issuing common stock. The company’s pretax cost of debt is 7.6 percent, and its cost of equity is 11.5 percent. The company’s target...