If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price? NEED HELP WITH F THRU G-2 PLEASE
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I completed the answers for A-E, but I am unsure how to complete F-G2:
Astromet is financed entirely by common stock and has a beta of 1.40. The firm pays no taxes. The stock has a price-earnings multiple of 13.0 and is priced to offer a 10.7% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 5.0%. Calculate the following:
Required:
a. The beta of the common stock after the refinancing
b. The required return and risk premium on the common stock before the refinancing
c. The required return and risk premium on the common stock after the refinancing
d. The required return on the debt
e. The required return on the company (i.e., stock and debt combined) after the refinancing
COMPLETED ABOVE
If EBIT remains constant:
f. What is the percentage increase in earnings per share after the refinancing?
g-1. What is the new price-earnings multiple?
g-2. Has anything happened to the stock price?
NEED HELP WITH F THRU G-2 PLEASE
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- Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 11.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following: a-c Has been answered. Need the following answered, in Excel if possible. d. The required return on the debt (Enter your answer as a percent rounded to 1 decimal place.)e. The required return on the company (i.e., stock and debt combined) after the refinancing (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) a. Beta of the common stock 2.6selected answer correct b. Required return (before refinancing) 11.4selected answer correct % Risk premium (before refinancing) 6.6selected answer correct % c. Required return (after refinancing) 18.0selected answer correct %…I completed the answers for A-E, my calulations for F-G1 aren't computing correctly in MConnect. Astromet is financed entirely by common stock and has a beta of 1.35. The firm pays no taxes. The stock has a price-earnings multiple of 12.5 and is priced to offer a 11.5% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.6%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing COMPLETED ABOVE If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? NEED HELP WITH F &…stromet is financed entirely by common stock and has a beta of 1.70. The firm pays no taxes. The stock has a price-earnings multiple of 14.0 and is priced to offer a 10.4% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.2%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancing If EBIT remains constant: f. What is the percentage increase in earnings per share after the refinancing? g-1. What is the new price-earnings multiple? g-2. Has anything happened to the stock price?
- PLEASE HELP WITH D & E Astromet is financed entirely by common stock and has a beta of 1.30. The firm pays no taxes. The stock has a price-earnings multiple of 12.0 and is priced to offer a 10.8% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.8%. Calculate the following: Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt e. The required return on the company (i.e., stock and debt combined) after the refinancingSpam Corp. is financed entirely by common stock and has a beta of 1.0. The firm is expected to generate a evel, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 8 and a cost of equity of 12.5%. The company's stock is selling for $50. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with a 5% interest rate. The company is exempt from corporate income taxes. Assuming MM are correct, calculate the following items after the refinancing: a. The cost of equity b. The overall cost of capital (WACC)The Company KNV is in the construction industry and has outstanding debts valued at €4 million and its equity is valued at €6 million. The shares of KNV have a beta of 1.2 and the market has an expected risk premium of 8% p.a. The risk free rate is 4% p.a. and the KNV is risk free. The company doesn't pay any tax. Required: a) What is the required return on the KNV stock?. b) Estimate the company's cost of capital. c) Suppose the company wants to diversify its business and invest in the manufacturing of building materials. The beta of an unleveraged firm in the building materials sector is 1.1. Estimate the required return on KNV's new venture.
- Leverage and the Cost of Capital. Astromet is financed entirely by common stock and has abeta of 1.0. The firm pays no taxes. The stock has a price-earnings multiple of 10 and is pricedto offer a 10% expected return. The company decides to repurchase half the common stock andsubstitute an equal value of debt. Assume that the debt yields a risk-free 5%. Calculate thefollowing: (LO16-1)a. The beta of the common stock after the refinancingb. The required return and risk premium on the common stock before the refinancingc. The required return and risk premium on the common stock after the refinancingd. The required return on the debte. The required return on the company (i.e., stock and debt combined) after the refinancingIf EBIT remains constant:f. What is the percentage increase in earnings per share after the refinancing?g. What is the new price-earnings multiple? (Hint: Has anything happened to the stock price?)An unlevered firm has expected earnings of $2,401 and a market value of equity of $19,600. The firm is planning to issue $4,000 of debt at 6 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?Assume there are no corporate taxes. An all equity-financed firm, Imperial Industry, is considering changing its capital structure to ½ debt ½ equity. If currently the firm has a beta of 1.4, the return to the market is expected to be 10%, the risk-free rate is 5%, and the cost of debt is 5%, what is the cost of equity for the firm after the change in capital structure? a I do not want to answer this question. b 25% c 14% d 19% e 18% f 15%
- Spam Corp. is financed entirely by common stock and has a beta of .95. The firm is expected to generate a level, perpetual stream of earnings and dividends. The stock has a price-earnings ratio of 7.40 and a cost of equity of 13.51%. The company's stock is selling for $62. Now the firm decides to repurchase half of its shares and substitute an equal value of debt. The debt is risk-free, with an interest rate of 5.5%. The company is exempt from corporate income taxes. Assume MM is correct a. Calculate the cost of equity after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) b. Calculate the overall cost of capital (WACC) after the refinancing. (Enter your answer as a percent rounded to 2 decimal places.) c. Calculate the price-earnings ratio after the refinancing. (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Calculate the stock price after the refinancing. e. Calculate the stock's beta after the refinancing. with…Infosystems, Inc. has a debt/equity ratio = 2. The firm has a cost of equity of 12% and a cost of debt of 6%. Calculate the firm’s equity’s beta (β) after the target debt/equity ratio changes to 1.5. Assume that the cost of debt does not change. Ignore taxes and other market imperfections. The risk-free interest rate is 2% and the market risk premium is 7%.Do not use excel, use formulas to compute the question Anheuser-Bush InBev sustains in the last years a fixed level of debt of D=$110B, which is regarded to be risk-free. Moreover, the market value of its shareholders’ equity is E=$70B and the beta of its stock βE=1.4. Suppose that the CAPM holds. The risk-free rate is 2% and the market risk premium is 5%. The company plans to introduce a new ultra-light beer with zero calories, which will be called BudZero. The cost of bringing the beer to the market (at t=0) is $200M. BudZero is then expected to generate constant free cash flows equal to $100M, paid at the end of every year (starting at t=1), forever. Suppose that the “BudZero” project will be financed exclusively with equity. What is the net present value of this project?