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Tapley Inc. currently has assets of $5 million, zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $1 million, and pays out 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 5 percent per year, 200,000 shares of stock are outstanding, and the current WACC is 13.40%. The company is considering a recapitalization where it will issue $1 million in debt and use the proceeds to repurchase stock. Investment bankers have estimated that if the company goes through with the recapitalization, its before-tax cost of debt will be 11%, and its cost of equity will rise to 14.5%.
What is the stock's current price per share (before the recapitalization)?
Assuming the company maintains the same payout ratio, what will be its stock price following the recapitalization?
Arantxa Corporation has outstanding 20,000 shares of $5 par value common stock. Prepare Arantxa's journal entries to record these transaction using the cost method.
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According to Sec. 121, individuals who sell or exchange their personal residence after May 6, 1997, may exclude part or all of the gain if the house was owned and occupied as a principal residence for
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On December 31, 2006, Crawford Co. estimated that 1.5% of its net sales of $400,000 will become uncollectible.The company recorded this amount as an addition to Allowance for Doubtful Accounts. On May 11, 2007, Crawford Co.
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