Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, or $80 million. These outcomes are all equally likely, and this risk is diversifiable. Suppose the risk-free interest rate is 5% and that, in the event of default, 25% of the value of Gladstone’s assets will be lost to bankruptcy costs. (Ignore all other market imperfections, such as taxes.

a) What is the initial value of Gladstone’s equity without leverage? Now suppose Gladstone has zero-coupon debt with a $100 million face value due next year.

b) What is the initial value of Gladstone’s debt?

c) What is the yield-to-maturity of the debt? What is its expected return?

d) What is the initial value of Gladstone’s equity? What is Gladstone’s total value with leverage? Suppose Gladstone has 10 million shares outstanding and no debt at the start of the year.

e) If Gladstone does not issue debt, what is its share price?

f) If Gladstone issues debt of $100 million due next year and uses the proceeds to repurchase shares, what will its share price be? Why does your answer differ from that in part e)?

An annuity that goes on indefinitely is called a perpetuity. the payments of a perpetuity constitute a/an series. the equation is: a stock with no maturity is an example of a perpetuity. quantitative problem: you own a security that provides an annual dividend of $170 forever. the security’s annual return is 9%. what is the present value of this security? round your answer to the nearest cent. $

Benton company (bc), a calendar year entity, has one owner, who is in the 37% federal income tax bracket (any net capital gains or dividends would be taxed at a 20% rate). bc's gross income is $395,000, and its ordinary trade or business deductions are $245,000. ignore the standard deduction (or itemized deductions) and the deduction for qualified business income. if required, round computations to the nearest dollar. a. bc is operated as a proprietorship, and the owner withdraws $100,000 for personal use. bc's taxable income for the current year is $ , and the tax liability associated with the income from the sole proprietorship is $ . b. bc is operated as a c corporation, pays out $100,000 as salary, and pays no dividends to its shareholder. bc's taxable income for the current year is $ , and bc's tax liability is $ . the shareholder's tax liability is $ . c. bc is operated as a c corporation and pays out no salary or dividends to its shareholder. bc's taxable income for the current year is $ , and bc's tax liability is $ . d. bc is operated as a c corporation, pays out $100,000 as salary, and pays out the remainder of its earnings as dividends. bc's taxable income for the current year is $ , and bc's tax liability is $ .

Location test: question 1 of 54)water is a solvent because itoa. is made of moleculesob. dissolves many substancesc. is a saltd. has a large buffering capacity