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Skyrocket Electronic Company (SEC) is an all-equity firm. The number of ordinary shares outstanding is 1,000,000, which are currently selling for $30 each. The firm's Earnings Before Interest and Taxes (EBIT) is expected to be $3,600,000 per year for the foreseeable future. The company's current earning per share is $3.60. The management of the firm is considering a recapitalization plan to include financial leverage in its capital structure. The recapitalization plan involves issuing long-term debt at an interest rate of 6% and using the whole proceed to re-purchase its ordinary shares at its current market price. The sole objective of this recapitalization plan is to increase its EPS by 50% (i.e., from $3.60 to $5.40). As a financial analyst you have been approached by the management of SEC Company to determine the debt-equity ratio that will help the company achieve its EPS target (Assume the company does not pay any tax). You need to show detailed calculations including the amount of long-term debt to be issued, number of ordinary shares to be re-purchased and the debt-equity ratio.
A dealer wants to borrow $10 million using a bond repo but due to certain market restriction he cannot repo out the bond for 2 months.
If its marginal tax rate is 40 percent, what is Mercury's financial breakeven point?
What is the net impact on the market value of a corporate bond if the bond rating of the issuing organization decreases and market interest rates increase? Why?
What is the difference between net working capital and cash?
Dividends on COT corporation are expected to grow at a 9% per year. Assume that the discount rate on COT is 12% and that the expected dividend per share in one
4) For this fixed-rate mortgage with no-point (mortgage A), what is the effective yield?
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls
In 1985, a given, Japanes imported automobile, sold for 1,476,000 yen, or $ 8,200. If the car still sold for the same amount of yen today exchange reate is 144 yen per dollar. what would the car be selling for today in U.S dollars?
Mark Young has just won the state lottery, paying $50,000 a year for 20 years. He is to receive his first payment a year from now.
If so, what are the causes of this behavior and what are the effects on small investors? If not, provide an alternate explanation for large price swings
If London needs to have a total return of 0.23 during the year, then what is the dollar amount of income that she needed to have to reach her objective?
Using the high-low method based on machine hours, develop an estimate of variable electricity costs per machine hour. Using the high-low method based on machine hours, develop an estimate of fixed electricity costs per month.
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