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A company has 1M shares outstanding, a book value of equity of $100M, a constant opportunity...
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...
11) Company Z Prime has an investment opportunity costing $ 19 million today and providing cash...
11) Company Z Prime has an investment opportunity costing $ 19 million today and providing cash flows $ 5 million, $ 9 million and $ 7.1 million for 1, 2 and 3 years from now respectively. If the required return of the project is 8% what is the Net Present Value (NPV) of this project? 12) Company U has no debt outstanding currently and the cost of equity is 12%. Its EBIT is expected to be $ 186335 every year...
PL Fortuna Company issued 70.000 shares of Spursteck with a fair value of SIS per share,...
PL Fortuna Company issued 70.000 shares of Spursteck with a fair value of SIS per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition: Fortuna $2,100,000 4.600.000 Zoot Current assets Property, plant, and equipment (net) Goodwill Teulasts Acapella S 960,000 1.300.000 240.000 2.500.000 56,200.000 $ 800,000 $3.000.000 800,000 Liabilities and Stockholders' Equity Liabilities Common stock (51 ) Common stock is par Paid-in capital in excess of par...
Mario's Pizza is expected to pay a dividend of $3 per share at the end of...
Mario's Pizza is expected to pay a dividend of $3 per share at the end of year 1 (D1). These dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is the current value of the stock today? Question 4 1 pts Luigi's Bar is expected to pay a dividend of $4 per share out of earnings of $7.50 per share. If the required...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI Corp's cost of equity, use the following information: The CI Corp's beta is 1.2, expected return on the market is 8%, and the risk-free rate is 2%. Its pretax cost of debt is 4%, what is the company's WACC? The tax rate is 35%. Q4. (10 Points) You are trying to estimate the value of the Smoothie company. The expected after-tax cashflows from assets...
Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at...
Use the following information for questions 1-7. A corporation has 9,000,000 shares of stock outstanding at a price of $40 per share. Net Income is $28,000,000 and they just paid a dividend of $2 and the dividend is expected to grow by 5% per year forever (Therefore next year’s dividend will be 2*(1.05) = $2.10). The stock has a beta of .9, the current risk free rate is 4%, and the market risk premium is 6%. The corporation also has...
. Kicssling Corp. pays a constant S9 dividend on its stock. The company will maintain this...
. Kicssling Corp. pays a constant S9 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share price? 1. Metallica Bearings, Inc. is a young start-up company. No dividends will be paid on the stock over the next nine years, because the first needs to plow back its carnings to fuel growth. The...
Gaagle is a computer software company. The company has both debt and equity. The value of...
Gaagle is a computer software company. The company has both debt and equity. The value of the company’s assets is $200 million. The value of the company’s debt is $100 million. The beta of its debt is 0.4. The stock price is $20 per share. The dividend per share is expected to be $2 next year and is expected to grow at a rate of 6% each year in the future. The risk free rate is 4% and the market...
2. Disagree 2. WPU Inc. has 3 million shares outstanding, and has a book value of...
2. Disagree 2. WPU Inc. has 3 million shares outstanding, and has a book value of equity of $ 480 million. If the company has a Market to Book ratio (M/B) of 2.4, calculate the market price of stock for WPU under these conditions. How will this price change if the fully diluted number of shares is 3.3 million?. What is "fully diluted number of shares"? (14 Points)
If the expectation of short-term interest rate remains the same in the future, the expectations theory...
If the expectation of short-term interest rate remains the same in the future, the expectations theory predicts that the yield curve will be while the liquidity preference theory predicts that the yield curve will be_ A B. C. D. Flat; flat Upward sloping; upward sloping Flat; upward sloping Upward sloping; flat The market capitalization rate on the stock of Aberdeen Wholesale Company is 12%. Its expected ROE is 10% am dots expected EPS is $3.00. if the firm's plow-back ratio...
PL Fortuna Company issued 70.000 shares of Spursteck with a fair value of SIS per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition: Fortuna $2,100,000 4.600.000 Zoot Current assets Property, plant, and equipment (net) Goodwill Teulasts Acapella S 960,000 1.300.000 240.000 2.500.000 56,200.000 $ 800,000 $3.000.000 800,000 Liabilities and Stockholders' Equity Liabilities Common stock (51 ) Common stock is par Paid-in capital in excess of par...
Mario's Pizza is expected to pay a dividend of $3 per share at the end of year 1 (D1). These dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is the current value of the stock today? Question 4 1 pts Luigi's Bar is expected to pay a dividend of $4 per share out of earnings of $7.50 per share. If the required...
Q3. (10 Points) The debt-to-equity ratio of the CI Corp. is 0.5. To calculate the CI Corp's cost of equity, use the following information: The CI Corp's beta is 1.2, expected return on the market is 8%, and the risk-free rate is 2%. Its pretax cost of debt is 4%, what is the company's WACC? The tax rate is 35%. Q4. (10 Points) You are trying to estimate the value of the Smoothie company. The expected after-tax cashflows from assets...
. Kicssling Corp. pays a constant S9 dividend on its stock. The company will maintain this dividend for the next eight years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share price? 1. Metallica Bearings, Inc. is a young start-up company. No dividends will be paid on the stock over the next nine years, because the first needs to plow back its carnings to fuel growth. The...
2. Disagree 2. WPU Inc. has 3 million shares outstanding, and has a book value of equity of $ 480 million. If the company has a Market to Book ratio (M/B) of 2.4, calculate the market price of stock for WPU under these conditions. How will this price change if the fully diluted number of shares is 3.3 million?. What is "fully diluted number of shares"? (14 Points)
If the expectation of short-term interest rate remains the same in the future, the expectations theory predicts that the yield curve will be while the liquidity preference theory predicts that the yield curve will be_ A B. C. D. Flat; flat Upward sloping; upward sloping Flat; upward sloping Upward sloping; flat The market capitalization rate on the stock of Aberdeen Wholesale Company is 12%. Its expected ROE is 10% am dots expected EPS is $3.00. if the firm's plow-back ratio...
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