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Cross Town Cookies is an all-equity firm with a total market value of $780,000. The firm has 46,000 shares of stock outstanding. Management is considering issuing $197,000 of debt at an interest rate of 9 percent and using the proceeds to repurchase shares. Before the debt issue, EBIT will be $71,000. What is the EPS if the debt is issued? Ignore taxes.
rev: 06_14_2019_QC_CS-170956
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$.98
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$1.32
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$1.55
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$1.68
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$1.79
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- Brealey Corporation is currently all equity financed and has a value of $95 million. Investors currently require a return of 14.20 percent on common stock. Brealey pays no taxes. Brealey plans to issue $35 million of debt with a return of 4.1 percent and use the proceeds to repurchase common stock. What will be the value of the firm after the debt issue? Please state your answer in millions. Enter your response below. 95 Correct response: 95million This question has 4 parts, so you will be clicking verify 4 times. Given that the firm will still have a value of $95 million, what will be the value of the equity after the debt issue? Please state your answer in millions. Enter your response below. Number millionIf iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.Cross Town Cookies is an all-equity firm with a total market value of $695,000. The firm has 46,000 shares of stock outstanding. Management is considering issuing $146,000 of debt at an interest rate of 8 percent and using the proceeds to repurchase shares. Before the debt issue, EBIT will be $60,800. What is the EPS if the debt is issued? Ignore taxes. Multiple Choice $1.46 $.98 $1.20 $1.35
- Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.Lancaster Corporation, an investment banking company, often has extra cash to invest. Suppose Lancaster buys500 shares of Knight Corporation stock at $40 per share, representing less than 5% of Knight’soutstanding stock. Lancaster expects to hold the Knight stock for one month and then sell it.The purchase occurs on December 15, 2018. On December 31, the market price of one share ofKnight stock is $47 per share.Requirements1. What type of investment is this for Lancaster? Give the reason for your answer.2. Record Lancaster’s purchase of the Knight stock on December 15 and the adjustment tomarket value on December 31.3. Show how Lancaster would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018Rolled Gold Jewelers is an all-equity firm, with 5,000 shares of stock outstanding at a market price of $15 a share. The firm's management decided to issue $30,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 10%. What is the EPS at the break-even level of EBIT? Ignore taxes. Multiple Choice $1.46 $1.50 $1.67 $1.88 $1.94
- b) Country Markets has an unlevered cost of capital of 12 percent, a taxrate of 38 percent, and expected earnings before interest and taxesof $15,700. The company has $12,000 in bonds outstanding that have aISSUED BY THE CI, MGMT3048 ON JUNE 11, 2023 36 percent coupon and pay interest annually. The bonds are selling atpar value. What is the cost of equity?Company A pays out all available earnings as dividends. Company A is is entirely equity financed and is borrowing money to repurchase shares. Company A has 550,000 shares outstanding and Acme is expected to generate $2,500,000 in EBIT every year for the foreseeable future. Company A shareholders require an 8% return on investment. If Company A borrows money, it will have to pay a 4% interest annually on debt Company A wants to borrow money to repurchase shares such that Company A shareholders achieve a return on equity (ROE) of 15%. How much money does Acme need to borrow to repurchase shares?River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $170,000 of debt at an interest rate of 10% and use the proceeds to repurchase 17,000 shares at $10 per share. Profits before interest are expected to be $117,000. a. What is the ratio of price to expected earnings for River Cruises before it borrows the $170,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the ratio after it borrows? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- ABC Inc. has a the capital structure shown below. Liabilities Stockholders' Equity $122,099,000 $95,228,000 ABC Inc. will raise additional capital for new projects this year, in the amount of $44,978,000. The firm believes, however, that a capital structure with 56.25% debt is ideal. The firm will be able to issue new discount bonds at a price of $909 with a yield-to-maturity of 3%. Assuming they want to change their capital structure to the new target, how many new bonds will the firm need to issue? unur answer to the nearest bond.A new company plans to obtain P18 million financing. The company expects to obtain a yearly income of P2 million before interest and taxes. The firm is considering issuing bonds or an equal amount of bonds and preferred stock. The interest rate on bonds is 14 percent. The tax rate is 46 percent. What financing strategy would you recommend?? (with forecasted income statement)Paradise Travels is an all-equity firm that has 9,000 shares of stock outstanding at a market price of $27 a share. Management has decided to issue $25,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 7.3 percent. What are the earnings per share at the break-even level of earnings before interest and taxes? Ignore taxes.