Question
In: Finance
Green Manufacturing, Inc., plans to announce that it will issue $5 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue $5 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a 2 percent annual coupon rate. Green is currently an all-equity firm worth $16 Million with 800,000 shares of common stock outstanding. After the sale of bonds, Green will maintain the new capital structure indefinitely. Green currently generates annual pretax earnings of $4 million. This level of earnings is expected to remain constant in perpetuity. Green is subject to a corporate tax rate of 48 percent.
a. What is the expected return on Greens's equity before the announcement of the debt issue?
b. Construct Green's market value balance sheet before the announcement of the debt issue. What is the price per share of the firm's equity?
c. Construct Green's market value balance sheet immediately after the announcement of the debt issue.
d.What is Green's stock price per share immediately after the repurchase announcement?
e. How many shares will Green repurchase as a result of the debt issue? How many shares of common stock will remain after the repurchase?
f. Construct the market value balance sheet after the restructuring.
g. What is the required return on Green's equity after the restructuring?
Solutions
jeff jeffy answered 5 months agoRelated Solutions
Green Manufacturing, Inc., plans to announce that it will issue $6 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$6 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 4 percent annual
coupon rate. Green is currently an all-equity firm worth $10
million with 700,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$4 million. This level of earnings is...
Green Manufacturing, Inc., plans to announce that it will issue $7 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$7 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 3 percent annual
coupon rate. Green is currently an all-equity firm worth $14
million with 300,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$2 million. This level of earnings is...
Green Manufacturing, Inc., plans to announce that it will issue $2.1 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$2.1 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a coupon rate of 7
percent. Green is currently an all-equity company worth $8.13
million with 500,000 shares of common stock outstanding. After the
sale of the bonds, the company will maintain the new capital
structure indefinitely. The company currently generates annual
pretax earnings of $1.6 million. This level of...
Green Manufacturing, Inc. plans to announce that it will issue $3 million of perpetual debt and...
Green Manufacturing, Inc. plans to announce that it will issue
$3 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will have a 6-percent annual coupon rate.
Green is currently an all-equity firm worth $15 million, with
500,000 shares of common stock outstanding. After the sales of the
bonds, Green will maintain the new capital structure indefinitely.
Green currently generates annual pretax earnings of $3 million.
This level of earnings is expected to remain constant...
Green Manufacturing, Inc., plans to announce that it will issue $6 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$6 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 3 percent annual
coupon rate. Green is currently an all-equity firm worth $14
million with 900,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$5 million. This level of earnings is...
Green Manufacturing, Inc., plans to announce that it will issue $6 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$6 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 3 percent annual
coupon rate. Green is currently an all-equity firm worth $14
million with 900,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$5 million. This level of earnings is...
Green Manufacturing, Inc. plans to announce that it will issue $3 million of perpetual debt and...
Green Manufacturing, Inc. plans to announce that it will issue
$3 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will have a 6-percent annual coupon rate.
Green is currently an all-equity firm worth $15 million, with
500,000 shares of common stock outstanding. After the sales of the
bonds, Green will maintain the new capital structure indefinitely.
Green currently generates annual pretax earnings of $3 million.
This level of earnings is expected to remain constant...
Green Manufacturing, Inc., plans to announce that it will issue $1 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$1 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 4 percent annual
coupon rate. Green is currently an all-equity firm worth $18
million with 700,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$3 million. This level of earnings is...
Green Manufacturing, Inc., plans to announce that it will issue $3 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$3 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 2 percent annual
coupon rate. Green is currently an all-equity firm worth $14
million with 400,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$6 million. This level of earnings is...
Green Manufacturing, Inc., plans to announce that it will issue $3 million of perpetual debt and...
Green Manufacturing, Inc., plans to announce that it will issue
$3 million of perpetual debt and use the proceeds to repurchase
common stock. The bonds will sell at par with a 4 percent annual
coupon rate. Green is currently an all-equity firm worth $13
million with 800,000 shares of common stock outstanding. After the
sale of the bonds, Green will maintain the new capital structure
indefinitely. Green currently generates annual pretax earnings of
$2 million. This level of earnings is...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain the capabilities of the Ollgdbg and its interfaces. What is rebasing?
- Woodbridge Manufacturing case in Appendix E, and use the three primary project evaluation methods (NPV, IRR...
- I need some good/new/not common research topics for my proposal assignment (Don't Need Political Topics, Technology...
- Write a C++ program that reads integers from standard input until end of file. Print out...
- Woo Audio is a small company in New York that makes high-quality headphone amplifiers. The company...
- How are users categorized? In Linux, which user has all the privileges? Why do we need...
- Force Table: If the center ring were to have considerable mass, what effect would it have...
ADVERTISEMENT