Question
In: Finance
Pennewell Publishing Inc. (PP) Pennewell Publishing Inc. (PP) is a zero growth company. It currently has...
Pennewell Publishing Inc. (PP)
Pennewell Publishing Inc. (PP) is a zero growth company. It
currently has zero debt and its earnings before interest and taxes
(EBIT) are $80,000. PP's current cost of equity is 10%, and its tax
rate is 25%. The firm has 10,000 shares of common stock outstanding
selling at a price per share of $48.00.
Refer to the data for Pennewell Publishing Inc. (PP). Assume that
PP is considering changing from its original capital structure to a
new capital structure with 35% debt and 65% equity. This results in
a weighted average cost of capital equal to 9.125% and a new value
of operations of $657,534. Assume PP raises $230,137 in new debt
and purchases T-bills to hold until it makes the stock repurchase.
PP then sells the T-bills and uses the proceeds to repurchase
stock. How many shares remain after the repurchase, and what is the
stock price per share immediately after the repurchase?
Remaining Shares; P Post
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Solutions
jeff jeffy answered 8 months agoRelated Solutions
Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its...
Pennewell Publishing Inc. (PP) is a zero growth company. It
currently has zero debt and its earnings before interest and taxes
(EBIT) are $80,000. PP's current cost of equity is 10%, and its tax
rate is 40%. The firm has 10,000 shares of common stock outstanding
selling at a price per share of $48.00.
Refer to Exhibit 16.1. Assume that PP is considering changing
from its original capital structure to a new capital structure with
35% debt and 65% equity....
QUESTION 42 Pennewell Publishing Inc. (PP) Pennewell Publishing Inc. (PP) is a zero growth company. It...
QUESTION 42
Pennewell Publishing Inc. (PP)
Pennewell Publishing Inc. (PP) is a zero growth company. It
currently has zero debt and its earnings before interest and taxes
(EBIT) are $80,000. PP's current cost of equity is 10%, and its tax
rate is 25%. The firm has 10,000 shares of common stock outstanding
selling at a price per share of $48.00.
Refer to the data for Pennewell Publishing Inc. (PP). PP is
considering changing its capital structure to one with 30%...
Exhibit 16.1 CSUSM is a zero growth company. It currently has zero debt and its earnings...
Exhibit 16.1 CSUSM is a zero growth company. It currently has
zero debt and its earnings before interest and taxes (EBIT) are
$80,000. CSUSM 's current cost of equity is 10%, and its tax rate
is 40%. The firm has 10,000 shares of common stock outstanding
selling at a price per share of $48.00.
11.Refer to Exhibit 16.1. CSUSM is considering changing its
capital structure to one with 30% debt and 70% equity, based on
market values. The debt would...
Smith’s HVAC currently has EBIT of $65,000 and is a zero growth company. It has $150,000...
Smith’s HVAC currently has EBIT of $65,000 and is a zero growth
company. It has $150,000 (book value) of perpetual debt outstanding
carrying a coupon rate of 7% and a current market price of 101.2.
Smith's current cost of equity is 9.3%, and its tax rate is 21%.
The firm has 10,000 shares of common stock outstanding selling at a
price per share of $60.00. (Hint: Do not worry about calculating
unlevered beta for this problem.)
a. What is Smith's...
Mason's Co currently has EBIT of $65,000 and is a zero growth company. It has $150,000...
Mason's Co currently has EBIT of $65,000 and is a zero growth
company. It has $150,000 (book value) of perpetual debt outstanding
carrying a coupon rate of 7% and a current market price of 101.2.
Smith's current cost of equity is 9.3%, and its tax rate is 21%.
The firm has 10,000 shares of common stock outstanding selling at a
price per share of $60.00. Please show all calculations.
a. What is Mason's current total market value and weighted
average...
Martin Company has EBIT of $65,000 and is a zero growth company. It has $150,000 (book value)...
Martin Company has EBIT of $65,000 and is a zero growth
company. It has $150,000 (book value) of perpetual debt
outstanding carrying a coupon rate of 7% and a current market price
of 101.2. Smith's current cost of equity is 9.3%, and its tax rate
is 21%. The firm has 10,000 shares of common stock outstanding
selling at a price per share of $60.00.
What is the current total market value and weighted average cost
of capital?
The Martin company is...
The Kimberly Corporation is currently a zero growth firm with an expected EBIT of $100,000 and...
The Kimberly Corporation is currently a zero growth firm with an
expected EBIT of $100,000 and zero debt financing,
and the cost of equity to an unleveled firm in the same risk class
is 16.0 percent.
(a). No taxes are currently imposed on
Kimberly’s earnings. What is the value of the
firm (VU
)?
(b) Now, assume that Kimberly still pays no
taxes but now decides to use
$500,000
of 12.0 percent debt
financing. Write down (do not calculate)...
The Kimberly Corporation is currently a zero growth firm with an expected EBIT of $100,000 and...
The Kimberly Corporation is currently a zero growth firm with an
expected EBIT of $100,000 and zero debt financing,
and the cost of equity to an unleveled firm in the same risk class
is 16.0 percent.
(a). No taxes are currently imposed on
Kimberly’s earnings. What is the value of the
firm (VU
)?
(b) Now, assume that Kimberly still pays no
taxes but now decides to use
$500,000
of 12.0 percent debt
financing. Write down (do not calculate)...
Books Inc. is a publicly traded publishing company. It has a current stock price of $75...
Books Inc. is a publicly traded publishing company. It has a
current stock price of $75 per share and an equity beta of 0.8.
Books is consistently profitable and faces a marginal tax rate of
21%. It also maintains a target leverage ratio of 40%. Books’ debt
is AAA-rated and can be considered essentially risk free. The risk
free rate in the economy is 5% and the market premium is 4%. You
may assume that the CAPM holds.
Part 1:...
: The Rocky Mountain district sales manager of Rath Publishing Inc., a college textbook publishing company,...
: The Rocky Mountain district sales manager of Rath Publishing
Inc., a college textbook publishing company, claims that the sales
representatives make an average of 50 sales calls per week on
professors. Several reps say that this estimate is too low. To
investigate, a random sample of 28 sales representatives reveals
that the mean number of calls made last week was 51. The standard
deviation of the sample is 1 calls. Using the 0.05 significance
level, can we conclude that...
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