Question

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?

Solutions

Expert Solution

jeff jeffy answered 5 months ago
Next > < Previous

Related 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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT