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River Cruises is all-equity-financed with 46,000 shares. It now proposes to issue $210,000 of debt at...
River Cruises is all-equity-financed. Suppose it now issues $ 450,000 of debt at an interest rate of 10%
4. River Cruises is all-equity-financed. Suppose it now issues $ 450,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 45,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Rework showed below by selecting values per each scenario and account to show how earnings per share and share return vary with operating income after the financing. 5. Dunet is financed 40% by debt yielding 8%. Investors...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 $ Price per share Market value of shares 10...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 $ Price per share Market value of shares 10 $1,000,000 State of the Economy Slump 73,750 Normal Boom Profits before interest 122,500 184,000 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share 10 Market value of shares $...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share 10 Market value of shares $1,000,000 State of the Economy Slump 76,000 Normal Вoom Profits before interest 127,000 188,500 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data....
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market value of shares $ 1,000,000 State of the Economy Slump Normal Boom Profits before interest $ 72,250 119,500 181,000 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute...
9. Earnings and Leverage. Suppose that River Cruises, which currently is all-equity-financed, issues S250,000 of debt...
9. Earnings and Leverage. Suppose that River Cruises, which currently is all-equity-financed, issues S250,000 of debt and uses the proceeds to repur chase 25,000 shares. Assume the fimm pays no taxes and that debt finance has no impact on its market value. Rework Table 16.2 to show how earnings per share and share return now vary with operating income. (LOD) Debt and Payout Policy 50,000 Data Number of shares Price per share Market value of shares Market value of debt...
Consider an all‐equity firm with EBIT of $10MM, expected to stay at that level over time....
Consider an all‐equity firm with EBIT of $10MM, expected to stay at that level over time. There is no depreciation and no investment: all after‐tax earnings paid as dividends. The current market capitalization is $100MM. There are 10MM shares, which are priced at $10 per share. The corporate tax rate is 30%. Now suppose the firm issues $80MM in perpetual debt (i.e., a perpetuity) at an interest rate of 5% per year and uses debt proceeds to buys back shares....
Macbeth Spot Removers is entirely equity financed. Use the following information. Data Number of shares 3,000...
Macbeth Spot Removers is entirely equity financed. Use the following information. Data Number of shares 3,000 Price per share $ 50 Market value of shares $ 150,000 Expected operating income $ 22,500 Return on assets 15 % Macbeth now decides to issue $75,000 of debt and to use the proceeds to repurchase stock. Suppose that Ms. Macbeth's investment bankers have informed her that since the new issue of debt is risky, debtholders will demand a return of 10.5%, which is...
Macbeth Spot Removers is entirely equity financed. Use the following information. Data Number of shares 1,800...
Macbeth Spot Removers is entirely equity financed. Use the
following information.
Data
Number of shares
1,800
Price per share
$
26
Market value of shares
$
46,800
Expected operating income
$
7,020
Return on assets
15
%
Macbeth now decides to issue $23,400 of debt and to use the
proceeds to repurchase stock. Suppose that Ms. Macbeth's investment
bankers have informed her that since the new issue of debt is
risky, debtholders will demand a return of 11.7%, which is...
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...
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...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 $ Price per share Market value of shares 10 $1,000,000 State of the Economy Slump 73,750 Normal Boom Profits before interest 122,500 184,000 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing...
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share 10 Market value of shares $1,000,000 State of the Economy Slump 76,000 Normal Вoom Profits before interest 127,000 188,500 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data....
9. Earnings and Leverage. Suppose that River Cruises, which currently is all-equity-financed, issues S250,000 of debt and uses the proceeds to repur chase 25,000 shares. Assume the fimm pays no taxes and that debt finance has no impact on its market value. Rework Table 16.2 to show how earnings per share and share return now vary with operating income. (LOD) Debt and Payout Policy 50,000 Data Number of shares Price per share Market value of shares Market value of debt...
Macbeth Spot Removers is entirely equity financed. Use the
following information.
Data
Number of shares
1,800
Price per share
$
26
Market value of shares
$
46,800
Expected operating income
$
7,020
Return on assets
15
%
Macbeth now decides to issue $23,400 of debt and to use the
proceeds to repurchase stock. Suppose that Ms. Macbeth's investment
bankers have informed her that since the new issue of debt is
risky, debtholders will demand a return of 11.7%, which is...
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...
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...
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