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Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000

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1. Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000, and 0.4 probability of a bad year with operating cash flow of \$30,000. The company has a debt of \$35,000 with 8% interest due next year. Assuming the company has no means of servicing its debt other than operations, and a 0% tax rate, which of the following is True:
a) Shareholders expected claim is \$12,200
b) Creditors expected claim is \$37,800
c) Creditors expected claim is \$34680
d) None of the above.

2. Poto corporation has a net income of \$20,000 and tax rate of 35%. Its total debt is \$25,000 with
Principal Payments of \$5000 due at the end of each year and an annual interest rate of 8%. What will be Poto Corporations’s interst tax shield in the upcoming year?
a) \$8,750 b) \$700 c) \$9,450 d) \$2,450

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[Solved] Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000

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• Submitted On 20 Jan, 2015 08:16:33

1. Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000, and 0.4 probability of a bad year with operating cash flow of \$30,000. The company has a debt of \$35,000 with 8% interest due next year. Assuming the company has no means ...

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Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000

1. Tomy Inc. has a 0.6 probability of a good year with operating cash flow of \$50,000, and 0.4 probability of a bad year with operating cash flow of \$30,000. The company has a debt of \$35,000 with 8% interest due next year...

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