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The Anderson Company Ltd. (ACL) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. ACL's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.
Now, assume that ACL is considering changing from its original capital structure to a new capital structure that results in an increased cost of equity to 9.5%. The resulting capital structure would have a $402,684.60 total market value of equity and a $604,026.80 market value of debt. How many shares would ACL repurchase in the recapitalization?
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What was the return (in percent) of the stock market that day?
Which of the following is NOT a reason for policy exclusion?
The appropriate discount rate is 10 percent. What is the financial break-even point for the project?
Jiminy's Cricket Farm issued a 30-year, 7.2 percent semiannual bond 7 years ago. The bond currently sells for 91.5 percent of its face value. The book value of this debt issue is $95 million. In addition, the company has a second debt issue, a zero c..
Broxholme Industries has sales of $40 million, equity totaling $27.5 million, and an ROS of 12%. The sustainable growth rate has been calculated at 14.5%. What dividend payout ratio was assumed in this calculation?
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Jarrod is a college student. All of Jarrod's disposable income is used to pay his college-related expenses. While he has no liabilities (Jarrod is on a scholarship), he does have a credit card that he typically uses for emergencies. Jarrod has $83 in..
Amalagmated Mining has very high operating leverage due to the capital intensisve nature of the steel business. The firms CEO is concerned about the variability in the firms EPS is sales should drop, and decides to take action. Which of thee followin..
find what Stock Co.’s cost of equity will be if it changes to a debt to equity ratio of 2/5, given a YTM on its debt of 5.25%.
What are the short-run and long-run effects on the earnings of each of the following: Labor employed in the wheat industry? - Labor in the cloth industry?
What is the expected return on the market and What is the risk-free rate?
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