User Account

All Pages

What are nile earnings per share

Assignment Help Financial Accounting
Reference no: EM132535117

Nile Motors, a producer of generators, is in this condition: EBIT = Br. 4 million; tax rate( T) = 35%; debt outstanding (D) = Br. 2 million; k d = 10%; k s = 15%; shares of stock outstanding = N 0 = 600,000; and book value per share = Br. 10. Since Nile's product market is stable and the company expects no growth, all earnings are paid out as dividends. The debt consists of perpetual bonds.

Required:

Question a. What are Nile's earnings per share (EPS) and its price per share (P 0 )?

Question b. What is Nile's weighted average cost of capital (WACC)?

Question c. Nile Motors can increase its debt by Br. 8 million, to a total of Br. 10 million, using the new debt to buy back and retire some of its shares at the current price. Its interest rate on debt will be 12% (it will have to call and refund the old debt), and its cost of equity will rise from 15% to 17%. EBIT will remain constant. Should Nile Motors change its capital structure?

Question d. If Nile Motors did not have to refund the Br. 2 million of old debt, how would this affect things? Assume that the new and the still outstanding debt are equally risky, with k d = 12%, but that the coupon rate on the old debt is 10%.

Reference no: EM132535117

Questions Cloud

Compute the amount of factory overhead : During the month of February 2019, actual direct labor hours of 8,300 were incurred. Use this information to compute the amount of factory overhead
What will the beta of your portfolio be : If you put 30% of your money in BSRM, 40% in KSRM and 30% in ACI, what will the beta of your portfolio be?
Do agree with muchoz : Whilst he was sipping his alcohol he just said "All you are discussing is nonsense, Basel III is not meant for Africa". Do you agree with Muchoz?
What is statement of stockholders equity for month ended : What is the statement of stockholders' equity for the month ended October 31? If there is a net loss or there has been a decrease in stockholders' equity
What are nile earnings per share : What are Nile's earnings per share (EPS) and its price per share ? Should Nile Motors change capital structure? What is Nile weighted average cost of capital
Calculate the times interest earned ratio : Paid income taxes of $30,000, and had before tax interest expense of $17,500. Use this information to calculate the Times Interest Earned Ratio
Create a Receive Payment and post it to the bank account : What are 2 methods of remedying this without undoing the bank reconciliation? Create a Receive Payment and post it to the bank account
Write a detailed report to the management of chikumbuso : Write a detailed report to the management of Chikumbuso Investments explaining the available alternatives to sort out their problems.
Which of the listed actions would improve this ratio : Now assume that General Hospital has a current ratio of 1.2. In this situation, which of the listed actions would improve this ratio

Reviews

Write a Review

Financial Accounting Questions & Answers

  Analysis for both semi-annual and continuous compounding

Mr. Miser, who is 35 years old, has just inherited $11,000 and decides to use the windfall towards his retirement. He places the money in a bank which promises a return of 6% per year until his planned retirement in 30 years. If his funds earn 6% int..

  Prepare a performance report for direct labor and power

Prepare a performance report for direct labor, power, and setups using the direct labor-based formulas. Prepare a performance report for direct labor, power, and setups using the multiple cost driver formulas that Gary developed.

  Capital structure between debt and equity issuances

Why is it important that we differentiate the sources of a company’s capital structure between debt and equity issuances like common stock? How does the use of ratios and percentages help us to significantly enhance our understanding of financial sta..

  Activity based costing

East Coast Marine Ltd (ECM) manufactures parts for small marine craft.-  Over the past decade, ECM's management has met its goal of reducing its reliance on government contract work to 50 per cent of total sales.

  What might be the new optimal production plan

The Harmon Music Company produces a variety of instruments. Because the company is small it would like to minimize the amount of money tied up in inventory by matching production iwth demand. ONe of the instruments produced is the model 85C trumpet w..

  Prepare the appropriate journal entries

The overhaul was completed on January 7, 2011 at a cost of $28,000. Because of a slowdown in the economy, the truck only operated for 21,000 km for the remainder of 2011. Instructions Prepare the appropriate journal entries for 2011 relating to t..

  Determine due dates on notes and bonds for classification

Review debt activity for a few days before and after year-end to determine whether transactions are included in the proper period. Determine due dates on notes and bonds for proper classification between current and long term debt.

  Find the total amount of expenses that katelyn will show

What are the total amount of expenses that Katelyn will show on their income statement for the month of January 2020? Katelyn incurred but did not pay $800.

  Develop and use the basic eoq model

Restrictive assumptions used to develop and use the basic EOQ model include all of the following except:

  A meeting of senior managers at the pringly division has

a meeting of senior managers at the pringly division has been called to discuss the pricing strategy for a new product.

  Show the absorption costing income statement

Explain the differences between absorption and variable costing. Find an example in another source besides your book of the variable costing contribution format income statement and then show the absorption costing income statement. Explain the diffe..

  Difference between a deferred asset and deferred liability

Imagine that you work in an accounting firm and your boss has requested you to present an overview of the tax structure to your organization. Two presentations have been requested. The first is a presentation that explains the differences between the..

Free Assignment Quote

Assured A++ Grade

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd