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In: Finance
Charisma Inc., has debt outstanding with a face value of $4.5 million. The value of the...
Charisma Inc., has debt outstanding with a face value of $4.5 million. The value of the firm if it were entirely financed by equity would be $18.3 million. The company also has 340,000 shares of stock outstanding that sell at a price of $41 per share. The corporate tax rate is 21 percent. What is the decrease in the value of the company due to expected bankruptcy costs?
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jeff jeffy answered 3 weeks agoRelated Solutions
Carpetto Technologies Inc. has a market capitalisation of $50 million and $50 million in outstanding debt....
Carpetto Technologies Inc. has a market capitalisation of $50
million and $50 million in outstanding debt. Its corporate tax rate
is 31%.
1.The beta of Carpetto Technologies Inc. is 1.7, the risk-free
rate is 8.5%, and the return on market is 13.5%, what will be
Carpetto’s cost of common equity using the Capital Asset Pricing
Model (CAPM) approach?
2.Suppose Carpetto’s debt of cost of capital is 10.5%. What is
Carpetto’s after tax debt of cost of
capital?
3.What is unlevered...
Carpetto Technologies Inc. has a market capitalisation of $50 million and $50 million in outstanding debt....
Carpetto Technologies Inc. has a market capitalisation of $50
million and $50 million in outstanding debt. Its corporate tax rate
is 31%.
The beta of Carpetto Technologies Inc. is 1.7, the risk-free
rate is 8.5%, and the return on market is 13.5%, what will be
Carpetto’s cost of common equity using the Capital Asset Pricing
Model (CAPM) approach?
Suppose Carpetto’s debt of cost of capital is 10.5%. What is
Carpetto’s after tax debt of cost of capital?
What is unlevered...
(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 6 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 10 million ordinary shares outstanding with a...
(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 2 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 14 million ordinary shares outstanding with a...
(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 6 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 10 million ordinary shares outstanding with a...
(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 2 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 14 million ordinary shares outstanding with a...
Boral currently has $400 million market value of debt outstanding. This debt was contracted five years...
Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 6 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 10 million ordinary shares outstanding with a price...
(i) Boral currently has $400 million market value of debt outstanding. This debt was contracted five...
(i) Boral currently has $400 million market value of debt
outstanding. This debt was contracted five years ago at the rate of
4%. Boral can refinance 60% of the debt at 5% with the remaining
40% refinanced at 6.5%. The company also has an issue of 6 million
preference shares outstanding with a market price of $20 per share.
The preference shares offer an annual dividend of $1.5 per share.
Boral also has 10 million ordinary shares outstanding with a...
Executive Cheese has issued debt with a market value of $114.91 million and has outstanding 14.30...
Executive Cheese has issued debt with a market value of $114.91
million and has outstanding 14.30 million shares with a market
price of $10 a share. It now announces that it intends to issue a
further $64.39 million of debt and to use the proceeds to buy back
common stock. Debtholders, seeing the extra risk, mark the value of
the existing debt down to $62 million.
a. Calculate the market price of the stock
following the announcement. (Round your answer...
Executive Cheese has issued debt with a market value of $100.96 million and has outstanding 15.40...
Executive Cheese has issued debt with a market value of $100.96
million and has outstanding 15.40 million shares with a market
price of $10 a share. It now announces that it intends to issue a
further $57.04 million of debt and to use the proceeds to buy back
common stock. Debtholders, seeing the extra risk, mark the value of
the existing debt down to $64 million.
a. Calculate the market price of the stock
following the announcement. (Round your answer...
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