Reference no: EM133119153
1. Boris Corporation is financed with 0.23 percent debt and the rest equity. It has a leveraged beta of 1.0 and is subject to a 0.4 corporate tax rate. What is Boris's unleveraged beta.
2. The current value of a firm is 8,600 and it is 100% equity financed. The firm is considering restructuring so that it is 100% debt financed. If the firm's corporate tax rate is 0.6, what will be the new value of the firm under the MM theory without taxes, transactions costs, or the possibility of bankruptcy.
3. The current value of a firm is 238,000 dollars and it is 100% equity financed. The firm is considering restructuring so that it is 40% debt financed. If the firm's corporate tax rate is 0.5, what will be the new value of the firm under the MM theory with corporate taxes but no possibility of bankruptcy.
4. The current value of a firm is 128,600 dollars and it is 100% equity financed. The firm is considering restructuring so that it is 80% debt financed. If the firm's corporate tax rate is 0.8, the typical personal tax rate of an investor in the firm's stock is 0.4, and the typical tax rate for an investor in the firm's debt is 0.7 what will be the new value of the firm under the MM theory with corporate taxes but no possibility of bankruptcy.
5. A firm is considering two different financing capital structures (CS1 and CS2). In the first capital structure CS1 the firm will issue equity which will pay expected dividends of $2 million every year perpetually, and debt of maturity 10 years that will pay expected coupons of $3 million annually (6% of facevalue of $50 million). The equity is discounted at a rate of 10.30% annually, and the debt is discounted a rate of 6% annually.
In the second capital structure the firm will issue equity which will pay expected dividends of $4 million every year perpetually, and debt of maturity 10 years that will pay coupons of $1 million annually (8% of facevalue of $ 12.5 million). The debt is discounted a rate of 8% annually. What is the rate of discount for equity in CS2.
Assume that Modigliani-Miller and its assumptions are true.
Please express your answer as a percentage. For example, if your answer is 7.32%, then enter 7.32 in the answer box.
6. A firm has 1,000,000 shares outstanding with a price per share of $27.00 (previous to any dividend payment).
It decides to pay out cash dividend of $2,300,000.
What will the share price be after the dividend has been paid.
Assume that Modigliani-Miller and its assumptions are true.
7. A firm has 10,000,000 shares outstanding with a price per share of $22.20 (previous to "Rights Issue").
It does a "Rights Issue" where it offers 2,000,000 shares to existing shareholders at a price of $16.30.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.
The "Rights Issue" is fully subscribed, that is existing shareholders purchase all the shares offered.
What will the share price be after the dividend has been paid
Assume that Modigliani-Miller and its assumptions are true
8. A firm has 10,000,000 shares outstanding with a price per share of $20.40 (previous to a share repurchase).
The firm repurchases 2,000,000 shares with a price per share of $28.00.
A share repurchase is a transaction whereby a company buys back its own shares from the marketplace. (As the repurchase price is greater than the market price, equity holders may sell shares to the firm only in proportion to their holding.
What will the share price be after the share repurchase is completed.
Assume that Modigliani-Miller and its assumptions are true.
Please include workings.