Question

Ansignments - (2020) RUSA x Microsoft Word - Quis 33.dor x + → C Tile C:/Usershockshop/Downloads/Assignment%20%233%20-20BU512339%20(1).pdf Assignment #3 BUSI 2339 Answer the following questions: 1. XYZ Manufacturers plans to repurchase $10 million worth of common stock with borrowed funds. The following information is provided: Repurchase price-525 Net income after tax- $120 million EPS before repurchase = $1.5 Glven that the company finances the repurchase by borrowing at an after tax interest rate of 13.5%, what is the EPS alter the repurchase? 2. MD Co. has 10 million shares outstanding and each share is currently worth $50. The company made $35 milion in after-tax profits during 2010 and plans to buy back shares worth $1 million at the end of the year. Given that the company will be able to repurchase the shares at a 10% premium to the current market price, what is the company's EPS after the share repurchase? 3. ASIA CA. has 30 million shares outstanding, trading for $50, with an EPS of $2.50 and a P/E multiple of 24. The company cams net income of $200 million for the year and pays out an annual dividend of $1.50 per share. The board of directors is considering a 3-for-2 stock split al What is the company's stock price after the stock splikt? by What is the company's dividend yield after the stock split? Asiert 43-b...od Assignment 3 . A Loom_82006/1...ee Porsche ist nu.pdf A w ast Inwone lemp. - Type here to search we A ENG 205.41- 2

Answer 1

You have asked multiple unrelated questions in the same post. I have addressed the first one. Please post the balance questions separately one by one.

Incremental borrowing = D = Number of shares repurchased x Repurchase price = 10 million x 25 = $ 250 million

After tax interest rate = r = 13.5%

Incremental post tax interest cost = D x r = 250 x 13.5% = $ 33.75 million

Hence, the new net income after tax, NI = Old net income after tax - incremental post tax interest cost = 120 - 33.75 = $ 86.25 million

Number of shares outstanding before repurchase = Net income before repurchase / EPS before repurchase = 120 / 1.5 = 80 million

Number of shares outstanding after repurchase, N = Number of shares outstanding before repurchase - shares repurchased = (80 - 10) million = 70 million

hence, the EPS after repurchase = NI / N = 86.25 / 70 = $ 1.23 per share