What is the stock current price per share

Assignment Help Finance Basics

Reference no: EM13291754

Tapley Inc. currently has assets of $4 million, zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $2 million, and pays out 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 4% per year. 220,000 shares of stock are outstanding, and the current WACC is 12.50%.

The company is considering a recapitalization where it will issue $4 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 11% and its cost of equity will rise to 14.5%.

a. What is the stock's current price per share (before the recapitalization)? Round your answer to two decimal places.

b. Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Round your answer to two decimal places.

Reference no: EM13291754

Questions Cloud

What is the frequency of the current in radians per second : A 40 kHz sinusoidal voltage has zero phase angle and a maximum amplitude of 2.5 mV. When this voltage is applied across theterminals of a capacitor the resulting steady-statecurrent has a maximum amplitude of 125.67μA

Determine the magnitude of the sum of these two vectors : Two vectors A and B have components (0, 1, 2) and (-1, 3, 1), respectively. Determine the magnitude of the sum of these two vectors

What is the orbital speed of this second satellite : Two satellites are in circular orbits around a planet that has radius 9.00x10^6m. What is the orbital speed of this second satellite

Give the range of addresses suitable for locating the code : A microcontroller memory map shows 16K bytes of Flash EEPROM in memory space $C000-$FFFF and 1 K bytes of RAM in memoryspace $1000-$13FF. a- Give the range of addresses (in hex) suitable for locating the code.

What is the stock current price per share : Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Round your answer to two decimal places.

Determine the linear expansion coefficient of the material : A container is filled to the brim with 1.6 L of mercury at 20°C. Determine the linear expansion coefficient of the material

Find the ratio error when the secondary turn is reduced : A 1000/5 A currenttransformer bar primary type has the loss component of excitingcurrent equal to 0.7% of the primary current. Find the ratio error(i) when the turn's ratio is equal to normal ratio (ii) when the secondary turn is reduced by 0.5%.

Find the mass of the gun-glider-block system : A block and a gun are firmly affixed to opposite ends of a long glider mounted on a frictionless air track. find the mass of the gun-glider-block system

Explain freons are controversial because of the damage : Freons are controversial because of the damage they do to the ozone layer in the stratosphere. A 4.33-g sample of a particular freon in a 2.55 L bulb at 25°C has a pressure of 262 torr. What is the molar mass of the compound

User Account

All Pages