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This assignment requires an analysis of certain aspects of "Brown Ltd" After studying "Brown Ltd", answer the following questions: Assuming that - • Brown has no uncommitted internal funds which can be applied to financing the proposed expansion and replacement program; • Brown will finance any funding shortfall (after the proposed capital restructuring) with new debt. Brown's cost of equity will remain at 11% after tax, irrespective of changes to its debt ratio (i.e. the ratio of market value of total long-term debt to market value of total long-term funds) - Justify your answers to the following questions with full explanations, including, where applicable, itemised schedules of relevant capital structure components. (d) Quantify Brown's debt ratio before and after the capital restructuring. (e) Quantify Brown's WACC before and after the capital restructuring. (f) What discount rate did you use to evaluate the investment alternatives offered by the proposed capital expansion and replacement program? Justify your answer. Existing Capital Structure The present capital structure of the company is shown below. The current market value of the company's $1 ordinary shares paid to 50c is 85c. The company's debentures are currently quoted at their nominal value. On the basis of the above market value of ordinary shares the company's cost of equity capital is estimated at 11 per cent. Any new debt can be obtained at 7%. Capital Structure as at 30 June 2011 Proposed Investment Program Brown Plastics is planning to spend $700,000 on restructuring. Proposed Changes to Capital Structure The planned expansion and replacement program is to be financed partly by calling up the amount uncalled on the $1 ordinary shares. The reaction of the share market to the announcement of the planned expansion is expected to be favourable, and the market price per share is expected to rise to $1.45 per fully-paid share. Cost of equity capital is expected to remain at approximately 11 per cent despite this rise in market value of shares. Repayment of debentures with a total value of $300,000 is due and this is to be met partly from the call of 50c per ordinary share. Any additional financing will be sought through borrowings at the same cost as that of existing debt. Additional Information The current rate of company tax is 40 cents in the dollar.
Make an Income Statement to estimate Income from continuing operations and below the line: a) extraordinary loss ($100 tax) and b) loss in discontinued operations.
According to purchasing power parity, if a Big Mac sells for $3.29 in the United States and the exchange rate for the Iceland kronur is 117.51 kronur/$, what should the Big Mac sell for in Iceland?
Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D0 X (1+g), or $2.00 (1.06). Ke will be equal to 10 percent and g will be equal to 6 percent.
Define and explain "unbiased predictor" in terms of how the forward rate performs in estimating future spot exchange rates?
Give some examples that illustrate fow (a) seasonal factors and (b) different growth rates might distort a comparative ratio analysis. How might these problems be alleviated?
If it does so, unit sales would remain unchanged and $5of the$9 per unit costs assigned to Product A would be eliminated . Should the company continue to manufacture Product A or purchase Product B for resale?
The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is 0.60 and the payout ratio is 9.5 percent. What is the internal growth rate?
The common stock of Connor, Inc., is selling for $22 a share and has a dividend yield of 4.4 percent. What is the dividend amount?
What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 20 percent each in A and B, and 60 percent in C?
locatenbspan organization that has an international presence.writenbspa 1400- to 1750-word paper on your organization
Campbell's marginal tax rate is 30 percent and it cost of capital is 10 percent.
Calculation of fifth year cash flow if the cash flows shown below have a future worth of 0
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