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In: Finance
XYZ, Inc., is an all-equity firm with a total market value of $729,000 and 47,300 shares...
XYZ, Inc., is an all-equity firm with a total market value of $729,000 and 47,300 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $95,400 if the economy is normal. If there is a recession, EBIT will be 30 percent lower, and if there is a boom, EBIT will be 40 percent higher. The tax rate is 35 percent. What is the EPS in a boom?
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jeff jeffy answered 2 years agoRelated Solutions
The Greenbriar is an all-equity firm with a total market value of $596,000 and 23,200 shares...
The Greenbriar is an all-equity firm with a total market value
of $596,000 and 23,200 shares of stock outstanding. Management is
considering issuing $213,000 of debt at an interest rate of 9
percent and using the proceeds on a stock repurchase. Ignore taxes.
How many shares will the firm repurchase if it issues the debt
securities?
XYZ Satellites Inc. is an all equity firm with 200,000 shares outstanding and $20 million in...
XYZ Satellites Inc. is an all equity firm with 200,000
shares outstanding and $20 million in earnings after taxes with a
market value of $350 million.The company borrows $75 million to
repurchase#50000 shares @8%.The tax rate is 50%.
1) What effect will this have on the earning per share of the
firm?
2) At what interest rate would have to be on the debt for the EPS
effect to disappear?
The Greenbriar is an all equity firm with a total market value of 536,000 and 21,200...
The Greenbriar is an all equity firm with a total market value
of 536,000 and 21,200 shares of stock outstanding. Management is
considering issuing 133,000 of debt at an interest rate of 9
percent and using the proceeds on a stock repurchase. How many
shares will the firm repurchase if it issues the debt
securities?
Cross Town Cookies is an all-equity firm with a total market value of $710,000. The firm...
Cross Town Cookies is an all-equity firm with a total market
value of $710,000. The firm has 46,000 shares of stock outstanding.
Management is considering issuing $155,000 of debt at an interest
rate of 7 percent and using the proceeds to repurchase shares.
Before the debt issue, EBIT will be $62,600. What is the EPS if the
debt is issued? Ignore taxes.
rev: 06_14_2019_QC_CS-170956
Multiple Choice
$1.56
$1.26
$1.44
$.98
$1.66
Southern Wind is an all-equity firm with 26,500 shares of stock outstanding and a total market...
Southern Wind is an all-equity firm with 26,500 shares of stock
outstanding and a total market value of $376,000. Based on its
current capital structure, the firm is expected to have earnings
before interest and taxes of $38,000 if the economy is normal,
$23,600 if the economy is in a recession, and $52,400 is the
economy booms. Ignore taxes. Management is considering issuing
$95,200 of debt with an interest rate of 6 percent, if the firm
issues the debt, the...
Hastings Company is currently an all equity firm with a total market value of $16,500,000 with...
Hastings Company is currently an all equity firm with a total
market value of $16,500,000 with 1,200,000 shares of stock
outstanding. The firm has expected EBIT of $1,380,000 if the
economy is normal and $1,870,000 if the economy booms. The firm is
considering a $4,500,000 bond issue with an attached interest rate
of 6 percent. The bond proceeds will be used to repurchase shares.
Ignore taxes. What will the earnings per share be after the
repurchase if the economy is...
MM Inc. is an all-equity firm (the firm value equals the value of equity). As the...
MM Inc. is an all-equity firm (the firm value equals the value
of equity). As the CEO of MM Inc., you are considering purchasing a
private jet for the firm. The private jet costs $12 million today
and will save $2 million (in today’s value) on travel expenses for
the firm over its life. You own 1% of MM's equity ownership. The
private benefits of the private jet to you are estimated to be
$800,000 in today’s value.
Suppose you...
MM Inc. is an all-equity firm (the firm value equals the value of equity). As the...
MM Inc. is an all-equity firm (the firm value equals the value
of equity). As the CEO of MM Inc., you are considering purchasing a
private jet for the firm. The private jet costs $12 million today
and will save $2 million (in today’s value) on travel expenses for
the firm over its life. You own 1% of MM's equity ownership. The
private benefits of the private jet to you are estimated to be
$800,000 in today’s value.
Suppose you...
Divido Corporation is an all-equity financed firm with a total market value of $100 million. The...
Divido Corporation is an all-equity financed firm with a total
market value of $100 million. The company holds $10 million in cash
equivalents and has $90 million in other assets. There are
1,000,000 shares of Divido common stock outstanding, each with a
market price of $100. What would be the impact on Divido's stock
price, market value, outstanding shares, and on the wealth of its
shareholders?
Of the payment of a cash dividend of $10 per share?
If the company...
DA Inc. is currently an all-equity firm, with a value of $500. It has 25 shares...
DA Inc. is currently an all-equity firm, with a value of $500.
It has 25 shares outstanding. The EBIT is 153.85 per year forever.
The tax rate is 35%. The payout is 100%. It is planning to do a
capital restructuring by issuing $200 of perpetual debt, costing
10% and use the proceeds to repurchase stock.
- What is the cost of unlevered equity?
- How many shares will it repurchase? At what price?
- What is the cost of...
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