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Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000,

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1. Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000, and 0.4 probability of a bad year with operating cash flow of \$30,000. The company has a debt of \$35,000 with 8% interest due next year. Assuming the company has no means of servicing its debt other than operations, and a 0% tax rate, which of the following is True;a) Shareholders expected claim is \$12,200;b) Creditors expected claim is \$37,800;c) Creditors expected claim is \$34680;d) None of the above.;2. Poto corporation has a net income of \$20,000 and tax rate of 35%. Its total debt is \$25,000 with;Principal Payments of \$5000 due at the end of each year and an annual interest rate of 8%. What will be Poto Corporations?s interst tax shield in the upcoming year?;a) \$8,750 b) \$700 c) \$9,450 d) \$2,450

Paper#29864 | Written in 18-Jul-2015

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