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Question 5
The following information applies to RTC logistics ltd:
Operating income(EBIT)...............=RM300,000
Shares outstanding ........................=120,000
Debt.................................................=RM100,000
EPS..................................................=RM1.45
Interest expense...............................=RM10,000
Stock price.........................................=RM17.40
Tax rate...............................................=40%
The company is considering recapitalization where it would issue RM348,000 worth of new debt and use the peoceeds to buy back RM348,000 worth of common stock. The buyback will be undertaken at the pre-recapitalization share price of RM17.40 per share.The recapitalization is not expected to have an effect on operating income or the tax rate. After the recapitalization,the company's total interest expenses will be RM50,000
Requirement:
Assume that the recapitalization has no effect on the company's price earnings(P/E) ratio.
What is the expected price of the company's stock following the recapitalization ? should RTC proceed with the recapitalization exercise?Explain.
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- Calculate liquidity measures The following amounts were reported on theDecember 31, 2013, balance sheet: Cash.......................................... $ 8,000Accounts receivable .................. 22,000Common stock ......................... 40,000Wages payable ......................... 5,000Retained earnings ..................... 80,000Land .......................................... 20,000Accounts payable ..................... $ 15,000Bonds payable .......................... 120,000Merchandise inventory .............. 30,000Buildings and equipment, net ofaccumulated depreciation ..... 180,000 Required:a. Calculate working capital at December 31, 2013.b. Calculate the current ratio at December 31, 2013.c. Calculate the acid-test ratio at December 31, 2013.arrow_forward#8Aaron Moses Company prepared the tabulation below at December 31, 2020.Net Income ............................................................................................................ $500,000Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense, $63,000 ..................................................................... ______Decrease in accounts receivable, $50,000 .................................................... ______Increase in inventory, $23,000 ....................................................................... ______Increase in accounts payable, $15,300 ......................................................... ______Increase in interest receivable, $7,000 .......................................................... ______Increase in supplies, $6,000 .......................................................................... ______Decrease in income taxes payable, $7,500…arrow_forwardNeed answer with this questionarrow_forward
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