Question

In: Finance

The Rivoli Company has no debt outstanding, and its financial position is given by the following...

The Rivoli Company has no debt outstanding, and its financial position is given by the following data:
Expected EBIT $600,000
Growth rate in EBIT, gL 0 %
Cost of equity, rs 10 %
Shares outstanding, no 100,000
Tax rate, T (federal-plus-state) 25 %

What is Rivoli's intrinsic value of operations (i.e., its unlevered value)? Round your answer to the nearest dollar.
What is its intrinsic stock price? Its earnings per share? Round your answers to the nearest cent.
Intrinsic stock price:
Earnings per share:
Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 25% debt based on market values, its cost of equity, rs, will increase to 11% to reflect the increased risk. Bonds can be sold at a cost, rd, of 8%. Based on the new capital structure, what is the new weighted average cost of capital? Round your answer to three decimal places.
What is the levered value of the firm? What is the amount of debt? Do not round intermediate calculations. Round your answers to the nearest dollar.
Levered value of the firm: $
Debt:
Based on the new capital structure, what is the new stock price? Do not round intermediate calculations. Round your answer to the nearest cent.
What is the remaining number of shares? Do not round intermediate calculations. Round your answer to the nearest whole number.
What is the new earnings per share? Do not round intermediate calculations. Round your answer to the nearest cent.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, its cost of equity, rs, will increase to 12%...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = Book value) $3,000,000 EBIT $500,000 Cost of equity, rS 10% Stock price, P0 $15 Shares outstanding, n0 200,000 Tax rate, T 40% Unlevered beta 1.0 The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rS, will increase...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = Book value) $3,000,000 EBIT $500,000 Cost of equity, rS 10% Stock price, P0 $15 Shares outstanding, n0 $200,000 Tax rate, T 40% Unlevered beta 1.0 The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rS, will increase...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 35% debt based on market values, its cost of equity, rs, will increase to 12%...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 35% debt based on market values, its cost of equity, rs, will increase to 11%...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, its cost of equity, rs, will increase to 11%...
The Rivoli Company has no debt outstanding, and its financial position is given by the following...
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, its cost of equity, rs, will increase to 11%...
The Rivoli Company has no debt outstanding and its financial position is given by the following...
The Rivoli Company has no debt outstanding and its financial position is given by the following data: Market value of Assets $10,000 EBIT $ 1,500 Stock price $10 Shares outstanding 1,000 Tax rate 35% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, the bonds can be sold at a cost, rd, of 8%. Rivoli is a no-growth firm and all of...
The Rivoli Company has no debt outstanding and its financial position is given by the following...
The Rivoli Company has no debt outstanding and its financial position is given by the following data: Market value of Assets $10,000 EBIT $ 1,500 Stock price $10 Shares outstanding 1,000 Tax rate 35% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, the bonds can be sold at a cost, rd, of 8%. Rivoli is a no-growth firm and all of...
Capital Structure Analysis The Rivoli Company has no debt outstanding, and its financial position is given...
Capital Structure Analysis The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Assets (Market value = book value) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, Po $15 Shares outstanding, no 200,000 Tax rate, T (federal-plus-state) 40% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rs, will...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT