Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Recapitalization
Tapley Inc. currently has total capital equal to $10 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $3 million, and pays out 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 5% per year, 310,000 shares of stock are outstanding, and the current WACC is 12.30%.
The company is considering a recapitalization where it will issue $2 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 9% and its cost of equity will rise to 15.5%.
What is the stock's current price per share (before the recapitalization)? Round your answer to the nearest cent.
$
Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Assume that shares are repurchased at the price calculated in Part a. Round your answer to the nearest cent. Do not round intermediate steps.
As a consultant to GBH skiwear, you have been ask to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. What discount rate should you use to evaluate the warehouse project?
What can be said about first-order autocorrelation given the Durbin-Watson value of 1.8911 calculated from the three factor model residuals?
KOOKIS, Inc., has developed a new cooky. The firm is planning to spend $60,000 on a new oven to produce the new cooky for 3 years. The machine has an expected life of three years, a $10,000 estimated resale value, and falls under the straight-line 3-..
Assume the following information for a car note: Original loan amount = $23,500 Annual interest rate = 7.25% Term of loan = 24 months. What is the principal balance on the loan after six months?
Morning Star Inc. sold an issue of 30-year, $1,000 par value bonds to the public. The bonds has a 14.6% coupon rate and pays interest annually. It is now 7 years later. The current market rate of interest of the Morning Star INc. bonds is 11.7%. What..
Estimate the interest rate paid by P&G on the 5/30 swap in Business Snapshot 5.4 if (a) the CP rate is 6.5% and the Treasury yield curve is flat at 6% and (b) the CP rate is 7.5% and the Treasury yield curve is flat at 7% with semi-annual compounding..
The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the..
Payback period Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000 and returns after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.
When comparing common stock of the same company it is fair to say that all shares, no matter how many classes, are all created with the same equal rights. companies sometimes have two different classes of shares with unequal rights to dividends an..
what are bond ratings and how do they impact bond valuation?who are the bond ratings agencies and what do the ratings
FedEx is selling for $110 a share. A FedEx call option with one month until expiration and an exercise price of $126 sells for $2.40 while a put with the same strike and expiration sells for $17.70. What is the market price of a zero-coupon bond with..
1.what concepts in the chapter are illustrated in this case? who are the stakeholders in this case?2. what are the
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd