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Eaton, Inc., wishes to expand its facilities. The company currently has 6 million shares outstanding and no debt. The stock sells for $30 per share, but the book value per share is $8. Net income is currently $3 million. The new facility will cost $45 million, and it will increase net income by $840,000. Assume a constant price-earnings ratio. a-1 Calculate the new book value per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Book value $ a-2 Calculate the new total earnings. Total earnings $ a-3 Calculate the new EPS. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) EPS $ per share a-4 Calculate the new stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock price $ a-5 Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your final answer to 4 decimal places, e.g., 32.1616.) Market-to-book ratio b. What would the new net income for the company have to be for the stock price to remain unchanged? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to nearest whole dollar amount, e.g., 32.) Net income $
You just sold short 850 shares of Wetscope, Inc., a fledgling software firm, at $80 per share. You cover your short when the price hits $72.50 per share one year later. If the company paid $.33 per share in dividends over this period, what is your ra..
Explain what happens to utilization of resources as overall demand changes for a process, and the mix of demand changes. WHY is this important for a firm?
Jasper is bequeathed a thirty year deferred annuity that has a payment at the end of each third year. The first payment is for $15000 and is made five years after she receives inheritance. There is always an increase of $ 4000 from one payment to the..
Keys Financial has done extremely well in recent years, and its stock now sells for $175 per share. Management wants to get the price down to a more typical level, which it thinks is $25 per share. What stock split would be required to get to this pr..
Consider a common stock with the following expected dividends: $2 in one year (i.e., at t=1), $3 in two years (at t=2), $0 in three years (at t=3), $2 in four years (at t=4) and $5 in five years (at t=5).
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5,000,000 investment in net operating working capital. The company tax rate is 40%. Wha..
Identify the major business and financial risks such as interest rate risk, foreign exchange risk, credit, commodity, and operational risks
What kind of an option is this, in terms of the three investment project options we discussed (timing, follow-on, abandon)? Why - Is this like a put option or like a call option?
CP Venture Partners is looking at the possible investment of $1 million in an early-stage company (Startco). Given the stage of the investment, CP requires a 40% annual rate of return. The company earned $750,000 in EBITDA last year, and this amount ..
Lowell Corp . is an all - equity firm with $ 8 20,000 . It now wants to issue debt and raise the debt ratio to 0.40 from 0.0 without changing total assets. It plans to use the proceeds of the debt issue to retire some equity using a share repurchase...
Assume a currency swap in which two counterparties of comparable credit risk each borrow at the best rate available, yet the nominal rate of one counterparty is higher than the other. After the initial principal exchange, is the counter party that is..
Bond J has a coupon rate of 6 percent and Bond K has a coupon rate of 12 percent. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 2 percent, what is the percentage price ..
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