Repurchase in the recapitalization

Assignment Help Financial Management

Reference no: EM131919993

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?

Please show work

Reference no: EM131919993

Questions Cloud

Identify any personal misunderstandings about the formation : As you read the resources this week, what concepts seem especially relevant to you as a social worker?

Identify the fc vc and tc for massage therapy : Identify the FC, VC, and TC for massage therapy. Discuss which alternative is considered the most cost-effective given the CEA results.

What happened to the lindbergh baby : The ability to think critically is a key skill for success in the criminal justice field. It means not taking what you heard or read at face value.

How does this relate to the situation of the school loan : How does the topic of the student loan crisis bridge the problems in the education system and problems with work/the economy?

Repurchase in the recapitalization : How many shares would ACL repurchase in the recapitalization?

Coefficient of variation for each of three alternatives : Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.

Identify all of primary and secondary benefits of program : Identify all of the primary and secondary benefits of the program. Also identify the direct and indirect costs. Briefly explain the direct and indirect costs.

Identify various research methods to study human behavior : Identify a hypothesis about this area of development. Identify the various research methods and theories used to study human behavior.

Identify and analyse strategic issues : MGMT6011 Strategic Management Capstone Assignment - Development of a Case Study. Identify and analyse strategic issues

User Account

All Pages