# Week 10 activity – financial calculations

Submit your answer to each of the problems and show the calculations you used to arrive at the answer. You must show calculations to receive credit.

1. Salinas Corporation has net income of \$15 million per year on net sales of \$90 million per year. It currently has no long-term debt but is considering a debt issue of \$20 million. The interest rate on the debt would be 7%. Salinas currently faces an effective tax rate of 40%. What would be the annual interest tax shield to Salinas if it goes through with the debt issuance?
2. Carbon8 Corporation wants to raise \$120 million in a seasoned equity offering, net of all fees. Carbon8 stock currently sells for \$28.00 per share. The underwriters will require a fee of \$1.25 per share, and indicate that the issue must be underpriced by 7.5%. In addition to the underwriter’s fee, the firm will incur \$785,000 in legal, administrative, and other costs. How many shares must Carbon8 sell in order to raise the desired amount of capital?
3. FM Foods is evaluating its cost of capital. Use the following information provided on December 31, 2017, to estimate FM’s after-tax cost of equity capital.
• Yield to maturity on long-term government bonds: 4.4%
• Yield to maturity on company long-term bonds: 6.3%
• Coupon rate on company long-term bonds: 7%
• Historical excess return on common stocks: 6.5%
• Company equity beta: 1.20
• Stock price: \$40.00
• Number of shares outstanding (millions): 240
• Book value of equity (millions): \$5,240
• Book value of interest-bearing debt (millions): \$1,250
• Tax rate: 35.0%

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.