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6- Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000...
The current value of a firm is 838,300 dollars and it is 100% equity financed. The...
The current value of a firm is 838,300 dollars and it is 100% equity financed. The firm is considering restructuring so that it is 80% debt financed. If the firm's corporate tax rate is 0.8, the typical personal tax rate of an investor in the firm's stock is 0.2, and the typical tax rate for an investor in the firm's debt is 0.2 what will be the new value of the firm under the MM theory with corporate taxes but...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $96 a...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $96 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $192,000 with the proceeds used to buy back stock. The high- debt plan would exchange $384,000 of debt for equity. The debt will pay an interest rate of 11%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $192,000? (Round your...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For each of the questions that follow, assume no...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $97 a...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $97 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $194,000 with the proceeds used to buy back stock. The high-debt plan would exchange $388,000 of debt for equity. The debt will pay an interest rate of 9%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $194,000? (Round your answer...
HNK Worldwide is a taxable corporation. It is currently an all equity firm that has 2,000...
HNK Worldwide is a taxable corporation. It is currently an all equity firm that has 2,000 shares of stock outstanding with a market price of $30.12 a share. The tax rate is 35 percent. Its unlevered cost of equity is 8.0 percent. The firm is considering adding $60,000 of debt that pays 3 percent to its capital structure. The debt will be sold at par value. What will be the post-tax WACC after the capital restructuring? Select one: a. 12.4%...
Reliable Gearing currently is all-equity-financed. It has 12,000 shares of equity outstanding, selling at $80 a...
Reliable Gearing currently is all-equity-financed. It has 12,000 shares of equity outstanding, selling at $80 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $200,000 with the proceeds used to buy back stock. The high-debt plan would exchange $400,000 of debt for equity. The debt will pay an interest rate of 8%. The firm pays no taxes. a. What will be the debt-to-equity ratio after each possible restructuring? (Round your answers...
Your firm is financed 100% with equity and has a cost of equity capital of 13%....
Your firm is financed 100% with equity and has a cost of equity capital of 13%. You are considering your first debt issue, which would change your capital structure to 34% debt and 66% equity. If your cost of debt is 6%, what will be your new cost of equity? Assume no change in your firm's WACC due to the change in capital structures.
Your firm is financed 100% with equity and has a cost of equity capital of 15%....
Your firm is financed 100% with equity and has a cost of equity capital of 15%. You are considering your first debt issue, which would change your capital structure to 34% debt and 66% equity. If your cost of debt is 7%, what will be your new cost of equity? Assume no change in your firm's WACC due to the change in capital structures.
Roll Corporation has 20,000 shares of common stock outstanding. It's financed entirely with equity. The un-levered...
Roll Corporation has 20,000 shares of common stock outstanding. It's financed entirely with equity. The un-levered cost of capital is 14%. The company distributes all of its earnings to equity holders as dividends at the end of each year. And Roll Corporation is subject to a corporate tax rate of 30%. Roll Corporation estimates that its annual EBIT will be as follow: 20% Bust with EBIT 2600, 50% Expected with EBIT 3620, 30% Expansion with EBIT 4900. The firm expects...
Roll Corporation has 20,000 shares of common stock outstanding. It's financed entirely with equity. The un-levered...
Roll Corporation has 20,000 shares of common stock outstanding. It's financed entirely with equity. The un-levered cost of capital is 14%. The company distributes all of its earnings to equity holders as dividends at the end of each year. And Roll Corporation is subject to a corporate tax rate of 30%. Roll Corporation estimates that its annual EBIT will be as follow: 20% Bust with EBIT 2600, 50% Expected with EBIT 3620, 30% Expansion with EBIT 4900. The firm expects...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $96 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $192,000 with the proceeds used to buy back stock. The high- debt plan would exchange $384,000 of debt for equity. The debt will pay an interest rate of 11%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $192,000? (Round your...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For each of the questions that follow, assume no...
Reliable Gearing currently is all-equity-financed. It has 10,000 shares of equity outstanding, selling at $97 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $194,000 with the proceeds used to buy back stock. The high-debt plan would exchange $388,000 of debt for equity. The debt will pay an interest rate of 9%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $194,000? (Round your answer...
HNK Worldwide is a taxable corporation. It is currently an all equity firm that has 2,000 shares of stock outstanding with a market price of $30.12 a share. The tax rate is 35 percent. Its unlevered cost of equity is 8.0 percent. The firm is considering adding $60,000 of debt that pays 3 percent to its capital structure. The debt will be sold at par value. What will be the post-tax WACC after the capital restructuring? Select one: a. 12.4%...
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