Question

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. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Answer is not complete Outcomes Number of shares 75,000 10 Price per share Market value of shares $ 750,000 Market value of 250,000 debt State of the Economy Slump Normal Boom Profits before 76,000 188,500 127,000 interest 25,000 Interest 25,000 25,000 Equity earnings 163,500 51,000 102.000 Earnings per share Return on shares % %

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE