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Tartan Industries currently has total capital equal to $9 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $4 million, and distributes 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 5% per year, 120,000 shares of stock are outstanding, and the current WACC is 12.60%. 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 9% and its cost of equity will rise to 14.5%. What is the stock's current price per share (before the recapitalization)? Round your answer to the nearest cent. Do not round intermediate steps. $ Assuming that the company maintains the same payout ratio, what will be its stock price following the recapitalization? Assume that shares are repurchased at the price calculated in part a. Round your answer to the nearest cent. Do not round intermediate steps. $
A stock has an expected return of 12 percent, its beta is 1.70, and the expected return on the market is 9.4 percent. What must the risk-free rate be?
An investment project costs $10,000 and has annual cash flows of $2,950 for six years. What is the discounted payback period if the discount rate is zero percent? Discounted payback period years What is the discounted payback period if the discount r..
The spot price of an investment asset is $25 and the risk-free rate is 8%, 8.5% and 9.5% for one-year-, two-year- and three-year-maturity, respectively.
You make steering wheels for Tesla using Kanban cards to authorize movement of incoming parts. In one portion of the system, a work center uses an average of 95 parts per hour while running. The manager has assigned an inefficiency factor of 0.24 to ..
Assuming a customer pays the invoice at the end of the costly trade credit period, what is the annualized cost of trade credit?
Mid-South Auto Leasing leases vehicles to consumers. Calculate the amount of dealer’s profit that Mid-South would recognize in this sales-type lease.
Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000; and the firm's assets (all equity financed) a..
Peterson Packaging Corp. has a basic earning power of (BEP) of 9% on $9 billion of total assets, and its times interest earned (TIE) ratio is 3.0. Peterson's depreciation and amortization expense totals $1 billion. It has $0.6 billion in lease paymen..
Calculate the expected return and stated deviation
What is the Total Initial Investment in this project? What is the operating cash flow for the project in year 1? What total amount of terminal value in year 3?
What is your estimate of Shatin's stock price after this announcement?
Stock Y has a beta of 1.4 and an expected return of 17.0 percent. Stock Z has a beta of 0.7 and an expected return of 10.1 percent. What would the risk-free rate have to be for the two stocks to be correctly priced?
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