BMAN23000A_L3

Description:

Answer all questions and then press submit. We will discuss the solutions together.


Your firm is planning to invest in a new electrostatic power generation system. Electrostat Inc is a firm that specializes in this business. Electrostat has a stock price of $25 per share with 16 million shares outstanding. Electrostat's equity beta is 1.18. It also has $220 million in debt outstanding with a debt beta of 0.08. Your estimate of the asset beta for electrostatic power generators is closest to:






The value of a firm is maximized when the:






The basic lesson of MM theory is that the value of a firm is dependent upon the:






In an MM world with a classical tax system, the value of a levered firm equals the value of:






Galt Industries has 50 million shares outstanding and a market capitalization of $1.25 billion. It also has $750 million in debt outstanding. Galt Industries has decided to delever the firm by issuing new equity and completely repaying all the outstanding debt. Assume perfect capital markets. The number of shares that Galt must issue is closest to: