Question

In: Finance

A company with a share price of $53 has shares outstanding of 6 million and net...

A company with a share price of $53 has shares outstanding of 6 million and net income of $20 million. The company conducts a leverage recapitalization to alter its capital structure by borrowing $3 million and using the proceeds to buy back shares. The pre-tax cost of debt is 5% and the company's tax rate is 35%.

What will be the new earnings per share after the leverage recapitalization?

Answer is 3.35 but not sure how...

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Company XYZ has 8.3 million shares outstanding. The current share price is $53, and the book...
Company XYZ has 8.3 million shares outstanding. The current share price is $53, and the book value per share is $4. XYZ has two bonds outstanding. Bond 1 has a face value of $70 million and a 7 percent Coupon rate and sells for 108.3% of par. Bond 2 has a face value of $60 million and 7.5% coupon rate and sells for 108.9% of par. Bond 1 matures in 8 years, Bond 2 matures in 27 years. All coupon...
Company XYZ has 8.3 million shares outstanding. The current share price is $53, and the book...
Company XYZ has 8.3 million shares outstanding. The current share price is $53, and the book value per share is $4. XYZ has two bonds outstanding. Bond 1 has a face value of $70 million and a 7 percent Coupon rate and sells for 108.3% of par. Bond 2 has a face value of $60 million and 7.5% coupon rate and sells for 108.9% of par. Bond 1 matures in 8 years, Bond 2 matures in 27 years. All coupon...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53,...
Dinklage Corp. has 10.1 million shares of common stock outstanding. The current share price is $53, and the book value per share is $4. The company also has two bond issues outstanding. The first bond issue has a face value of $83 million, has a 7 percent coupon, and sells for 91 percent of par. The second issue has a face value of $60.6 million, has a 7 percent coupon, and sells for 93.9 percent of par. The first issue...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72,...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $70 million, a coupon of 7 percent, and sells for 97 percent of par. The second issue has a face value of $50 million, a coupon of 8 percent, and sells for 106 percent of par. The first issue...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89,...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, a coupon of 6 percent, and sells for 96 percent of par. The second issue has a face value of $60 million, a coupon of 7 percent, and sells for 109 percent of par. The first issue...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72,...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $72, and the book value per share is $9. The company also has two bond issues outstanding. The first bond issue has a face value of $85 million, a coupon rate of 5 percent, and sells for 97 percent of par. The second issue has a face value of $70 million, a coupon rate of 4 percent, and sells for 109 percent of par. The...
Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $72...
Hero Manufacturing has 6 million shares of common stock outstanding. The current share price is $72 and the book value per share is $7. The company also has two bond issues outstanding, both with semiannual coupons. The first bond issue has a face value $70 million and a coupon of 7 percent and sells for 97 percent of par. The second issue has a face value of $50 million and a coupon of 8 percent and sells for 106 percent...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85,...
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon rate of 8 percent, and sells for 95 percent of par. The second issue has a face value of $40 million, a coupon rate of 9 percent, and sells for 108 percent of par. The...
Masterson, Inc., has 6 million shares of common stock outstanding. The current share price is $84,...
Masterson, Inc., has 6 million shares of common stock outstanding. The current share price is $84, and the book value per share is $5. The company also has two bond issues outstanding. The first bond issue has a face value of $145 million, has a coupon rate of 5 percent, and sells for 95 percent of par. The second issue has a face value of $130 million, has a coupon rate of 4 percent, and sells for 107 percent of...
Your company has earnings per share of ​$6. It has 1 million shares​ outstanding, each of...
Your company has earnings per share of ​$6. It has 1 million shares​ outstanding, each of which has a price of ​$60. You are thinking of buying​ TargetCo, which has earnings per share of ​$​3, & 1 million shares​ outstanding, and a price per share of ​$52.50. You will pay for TargetCo by issuing new shares. There are no expected synergies from the transaction. Complete parts a through d below. If you pay no premium to buy​ TargetCo, what will...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT