The best time to get an ARM is when the market rates of interest are high
Indicate whether this statement is true or false.
Answer: TRUE
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Discrete Discs Inc manufactures hard disk drives for personal computers. Discrete is an all equity firm. At the end of the current year, the CFO expects EBIT to be $10M and the same earnings are expected annually in perpetuity
The company is not growing so CAPEX and investments in net working capital are zero. The cost of equity for Discrete is 8%. Solid State Storage Inc is identical to Discrete except that it has $3M of long term debt outstanding. What is the value of Solid State's equity? The corporate tax rate is 30%. A) $84.5M B) $85.4M C) $87.5M D) $88.4M E) $122.9M
Input price risk and output price risk are both a form of commodity price risk
Indicate whether the statement is true or false