Question
Empire Industries forecasts net income this coming year as shown here(in thousands ofdollars): LOADING... . Approximately $250,000 ofEmpire's earnings will be needed to makenew, positive-NPV
Empire Industries forecasts net income this coming year as shown here(in thousands ofdollars): LOADING...
. Approximately $250,000 ofEmpire's earnings will be needed to makenew, positive-NPV investments.Unfortunately, Empire's managers are expected to waste 10% of its net income on needlessperks, petprojects, and other expenditures that do not contribute to the firm. All remaining income will be returned to shareholders through dividends and share repurchases.
a. What are the two benefits of debt financing forEmpire?
b. By how much would each $1 of interest expense reduceEmpire's dividend and sharerepurchases?
c. What is the increase in the total funds Empire will pay to investors for each $1 of interestexpense?
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Small Business Management Launching and Growing New Ventures
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
6th Canadian edition
176532218, 978-0176532215
