Phil plc and Costas plc are identical firms except that Costas is more levered. Both companies will remain in busin year. The economy is has recently been expanding. According to consensus forecasts, the probability of the contia current expansion is 60% for the next year, and the probability of a recession is 40%. If the expansion continues, e generate profit before interest and taxes of £2 million. If a recession occurs, each firm will generate profit before in of £800,000. Phil's debt obligation requires the firm to pay £750,00y at the end of the year. Costas's debt obligation firm to pay £1 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 per cent. What is value of (i) Phil plc and (ii) Costas plc? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. None of the above
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- Phil plc and Costas plc are identical firms except that Costas is more levered. Both companies will remain in business for one more year. The economy is has recently been expanding. According to consensus forecasts, the probability of the continuation of the current expansion is 60% for the next year, and the probability of a recession is 40%. If the expansion continues, each firm will generate profit before interest and taxes of £2 million. If a recession occurs, each firm will generate profit before interest and taxes of £800,000. Phil’s debt obligation requires the firm to pay £750,000 at the end of the year. Costas’s debt obligation requires the firm to pay £1 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 per cent. What is the market value of (i) Phil plc and (ii) Costas plc? a.None of the above b (i) £1,321,739 and (ii) £1,153,435 c (i) £1,530,435 and (ii) £1,530,435 d (i) £1,321,739 and (ii) £1,321,739 e (i)…Phil plc and Costas plc are identical firms except that Costas is more levered. Both companies will remain in business for one more year. The economy is has recently been expanding. According to consensus forecasts, the probability of the continuation of the current expansion is 60% for the next year, and the probability of a recession is 40%. If the expansion continues, each firm will generate profit before interest and taxes of £2 million. If a recession occurs, each firm will generate profit before interest and taxes of £800,000. Phil’s debt obligation requires the firm to pay £750,000 at the end of the year. Costas’s debt obligation requires the firm to pay £1 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 per cent. What is the market value of (i) Phil plc and (ii) Costas plc? a None of the above b (i) £1,321,739 and (ii) £1,153,435 c (i) £1,530,435 and (ii) £1,530,435 d (i) £1,321,739 and (ii) £1,321,739 e (i)…Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year, and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.4 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.8 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.9 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a- 1. a- № 2. b. What are the current market values of Steinberg's equity and debt? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the…
- Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year, and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $4.3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.7 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.8 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. What is the value today of Steinberg's debt and equity? What is the value today of Dietrich's debt and equity?Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $4.3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.7 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.8 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number,…Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.7 million. Steinberg's debt obligation requires the firm to pay $960,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.8 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 10 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number,…
- Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year, and the probability of a recession is 20 percent. If the expansion continues, each firm will generate an EBIT of $2.7 million. If a recession occurs, each firm will generate an EBIT of $1.1 million. Steinberg's debt obligation requires the firm to pay $900,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.2 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 13 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations. Round the final answer to the nearest whole dollar. Omit $ sign in your response.) Steinberg's $ 796,460 $ 513,274 Equity value Debt value a-2. What about Dietrich's?…Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.9 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.3 million. Steinberg's debt obligation requires the firm to pay $930,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.4 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole…Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent if the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.1 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of 51.5 million. Steinberg's debt obligation requires the firm to pay $940, 000 at the end of the year, Dietrich's debt obligation requires the firm to pay $1.6 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.…
- Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.4 million. Steinberg's debt obligation requires the firm to pay $930,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.5 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g.,…Wild Berry (WB) will remain in business for one more year. At the end of next year, the firm will generate a liquidating cash flow of S370M in a boom year and S150M in a recession year; both states are equally likely. The cost of equity for the unlevered firm is rU = 10%. The firm's outstanding debt matures in a year and has amarket (and book) value of S150M today. The interest payment on this debt is S15M at the end of next year. The corporate tax is ?c = 35%. Corporate taxes is the only relevant market imperfection. 23. What s WB's value as an unlevered firm (VU )2 (A)5 236.4M (8)S 260.0M (€)5336.4M (D) $370.0MHappy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 million