FINC 500 Homework Assignment for Week 7:

FINC 500 Homework Assignment for Week 7: Click Link Below To Buy: http://hwcampus.com/shop/finc-500-homework-assignment-for-week-7/ Contact Us: [email protected] For Week 7, please turn in the answers to the following questions: 1. When analysts use the term “capital structure,” what are they referring to? 2. Why does capital structure affect the market value of a firm? 3. Define “total risk” as it is used in capital structure theory. How is total risk measured? 4. The forecast for your firm indicates there's a 20% chance that Net Income will be $200,000, a 50% chance it will be $300,000, and a 30% chance it will be $400,000. a. Given these conditions and your answer to part a, what is the standard deviation of the Net Income estimate? b. Given your answers to parts a & b, what is the coefficient of variation (CV) of the net income estimate? 5. What’s the difference between business risk and financial risk? 6. Assume your firm is zero-growth and pays all its net income in dividends each year Also assume your firm can borrow money when it needs to at an interest rate of 6%. Currently your firm’s cost of equity (Rs) is 10%, but if any money is borrowed that cost will rise to 11%. Sales this year are expected to be $500,000 and operating costs are expected to be $400,000. Your firm’s effective tax rate is 40%. Given these conditions, what is the current value of your firm? What will be the new value of your firm if it takes on $250,000 in debt?