Need help with finance homwork

Chapter 13

Don't use plagiarized sources. Get Your Custom Essay on
Need help with finance homwork
Just from $13/Page
Order Essay


    1. Seattle Health Plans currently use zero-dept financing. Its operating income (EBIT) IS $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assets and because it is all equity financed $5 million in equity. Suppose the firm is considering replacing half of its equity financing with debt financing bearing an interest rate of 8 percent.
      1. What impact would the new capital structure have on the firm’s net income, total dollar return to investor, and ROE?
      1. Redo the analysis but now assume that the debt financing would cost 15 percent
      1. Return to the initial 8 percent interest rate. Now assume the EBIT could be as low as $500,000 (with a probability of 20 percent) or as high as $1.5 million (with a probability of 20 percent). There remains a 60 percent chance that EBIT would be $1 million. Redo the analysis for each level EBIT and find the expected values of the firms not income, total dollar return to investor s and ROE. What lesson about capital structure and risk does this illustration provide?
      1. Repeat the analysis required for Part a but now assume that Settle Health Plans is a non-for-profit corporation and pays no taxes. Compare the result with those obtained in Part a.
    1. Calculate the after tax cost of debt for the Wallace Clinic, a for- profit  healthcare provider, assuming that the coupon rate set on its debt is 11 percent and its tax rate is
      1. 0 percent
      1. 20 percent
      1. 40 percent
    1. St. Vincent Hospital has a target capital structure of 35 percent debt and 65 percent equity. Its cost of equity (fund capital) estimate is 13.5 percent and its cost of tax-exempt debt estimate is 7 percent. What is the hospital corporate cost of capital?
    1. Richmond Clinic has obtained the following estimate for its costs of debt and equity at various capital structure:


            Percent Debt                After Tax Cost of Debt           Cost of Equity

             0%                                                                             16%

             20                                   6.6%                                    17

              40                                   7.8                                      19

              60                                    10.2                                   22

              80                                     14.0                                  27


What is the firm’s optimal capital structure? (Hint: calculate its corporate cost of capital at each structure. Also note that data on component cost at alternative capital structure are not reliable in real world situations.       

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
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

At, we value all our customers, and for that, always strive to ensure that we deliver the best top-quality content that we can. All the processes, from writing, formatting, editing, and submission is 100% original and detail-oriented. With us, you are, therefore, always guaranteed quality work by certified and experienced writing professionals. We take pride in the university homework help services that we provide our customers.

Money-Back Guarantee

As the best homework help service in the world, 111 Papers ensures that all customers are completely satisfied with the finished product before disbursing payment. You are not obligated to pay for the final product if you aren’t 100% satisfied with the paper. We also provide a money-back guarantee if you don’t feel that your paper was written to your satisfaction. This guarantee is totally transparent and follows all the terms and conditions set by the company.

Read more

Zero-Plagiarism Guarantee

All products that we deliver are guaranteed to be 100% original. We check for unoriginality on all orders delivered by our writers using the most advanced anti-plagiarism programs in the market. We, therefore, guarantee that all products that we submit to you are 100% original. We have a zero-tolerance policy for copied content. Thanks to our strict no plagiarized work rule, you can submit your homework to your professor without worrying.

Read more

Free-Revision Policy

TThis is one of the most cherished courtesy services that we provide to help ensure that our customers are completely satisfied with our finished products. Delivering the best final product to our customers takes multiple inputs. prides itself on delivering the best university homework help services in the writing industry. And, in part, our free revision policy is how we do it. What’s more, all our revisions are 100% free without any strings attached.

Read more

Privacy Policy

Client privacy is important to use. We know and understand just how important customers value their privacy and always want to safeguard their personal information. Thus, all the information that you share with us will always remain in safe custody. We will never disclose your personal information to any third party or sell your details to anyone. 111 Papers uses the most sophisticated, top-of-the-line security programs to ensure that our customers’ information is safe and secured.

Read more

Fair-Cooperation Guarantee

Placing your order with us means that you agree with the homework help service we provide. We, in turn, will endear to ensure that we do everything we can to deliver the most comprehensive finished product as per your requirements. We will also count on your cooperation to help us deliver on this mandate. Yes, we also need you to ensure that you have the highest-quality paper.

Read more

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:
The price is based on these factors:
Academic level
Number of pages