What will the value of operations be after recapitalization

Reference no: EM13298261

A company currently has zero debt. It is a zero growth company with $70,000 EBIT and is considering recapitalizing with 20% debt. The money raised would cost 7% and be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise a full percent from its current 10%. The current price per share is $46.00 and it is in the 40% corporate tax bracket. What will the value of operations be after the recapitalization?

Reference no: EM13298261

Questions Cloud

How fast is joe moving : Joe is moving through space at an unknown speed. His clock runs 4 minutes per hour slower than Jane's clock, How fast is Joe moving

How to calculate the ph of the resulting solution : Calculate the pH of the resulting solution after the following volumes of HNO3 have been added. (e) 50.0 mL (f) 100.0 mL Show the work please

Should diamond bank pursue this strategy : Cross Exchange Rate: Assume Poland's currency (the zloty) is worth $.17 and the Japanese yen is worth $.008. What is the cross rate of the zloty with respect to yen? That is, how many yen equal a zloty?

What is the resulting speed of the particle : A particle with a mass of 3.65×10?24 kg and a charge of 6.40×10?19 C starts at rest and is accelerated for a distance of 0.104 m through a uniform electric field having strength E = 7.25×104 N/C

What will the value of operations be after recapitalization : The current price per share is $46.00 and it is in the 40% corporate tax bracket. What will the value of operations be after the recapitalization?

Define the temperature of the calorimeter rose : A 10 g sample of acetic acid, HC2H3O2 was burned in a bomb calorimeter in an excess of oxygen. The temperature of the calorimeter rose from 25 degree C to 35.84 degree C

Find how high up the incline the block will slide : A 4.98-kg pendulum bob, at a height of 0.720 m above the floor, is released and swings down to the ground, Find how high up the incline the block will slide

What is the company optimal capital structure and why : The risk-free rate is 5% and the market risk premium is 6%. ABC estimates that if it had no debt its volatility would be the same as the stock market's as a whole. The company's tax rate is 40%. What is the company's optimal capital structure and ..

Explain cyclohexane and toluene : Why is this a reasonable assumption for those products, but not for cyclohexane and toluene?

User Account

All Pages