Boda Cycling Corp is an all-equity firm that has 425,000 shares of stock outstanding. The company is in the process of borrowing $3.2 million at 5.5 percent interest to repurchase 90,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?   $3,200,000   $677,647   $8,421,053   $15,111,111

9 es Finch, Incorporated, is debating whether or not to convert its all-equity capital structure to one that is 20 percent debt. Currently, there are 6,000 shares outstanding and the price per share is $40. EBIT is expected to remain at $12,000 per year forever. The interest rate on new debt is 7 percent, and there are no taxes. a. Allison, a shareholder of the firm, owns 100 shares of stock. What is her cash flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What will Allison's cash flow be under the proposed capital structure of the firm? Assume she keeps all 100 of her shares. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. Assume that Allison unlevers her shares and re-creates the original capital structure. What is her cash flow now? Note: Do not round intermediate…

Jericho Snacks is an all-equity firm with estimated earnings before interest and taxes of $826,000 annually forever. Currently, the firm has no debt but is considering borrowing $650,000 at 6.75 percent interest. The tax rate is 34 percent and the current cost of equity is 17.2 percent. What is the value of the levered firm?     $3,187,271     $3,169,535     $3,307,271     $3,390,535     $3,506,418

Vijay

Supercool Inc is currently an unlevered firm with 1,000 outstanding shares. It expects togenerate $1,600 in EBIT in perpetuity. The tax rate is 35%. All earnings after tax are paid outas dividends. The firm is considering a capital restructuring for which the company will issue$3,000 of debt to buy back shares. Its cost of debt is 10%. Unlevered firms in the sameindustry have a cost of equity of 20%. The capital restructuring is going to take place onemonth after its announcement. What is the share price of Supercool on the day before andafter the restructuring completion?

Kinston Enterprises has a debt obligation of $47 million that is due now. The market value of Kinston's assets is $102 million, and the firm has no other liabilities. Assume that capital markets are perfect and that Kinston has 5 million shares outstanding. If Kinston decides to sell new shares to raise capital to pay its debt obligation, how many shares will be issued?   5.0 million   4.3 million   4.7 million   4.0 million

Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $80,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. Refer to Exhibit 16.1. Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase? A) $45.90 B) $48.12 C) $51.06 (D) $53.33 (E) $58.75

You currently own 1,500 shares of JKL, Inc. JKL is an all equity that has 700,000 shares of stock outstanding at a market price of $25 a share. The company's earnings before interest and taxes are $3,500,000. You believe that the JKL should finance 50 percent of assets with debt, but management refuses to leverage the company. Given that similar firms' pay 9 percent interest on their debt, answer the following questions. Part A: How much money should you borrow to create the leverage on your own? Assume you can borrow funds at 9 percent interest. Part B. How many additional shares of JKL stock must you purchase (using the borrowed funds in Part A) to create the leverage on your own?

Xtel Inc. with a total market value of $630 million has $30 million in excess cash and no debt. Xtel has 1 million shares outstanding. Xtelʹs board is meeng to decide whether to pay out its $30 million in excess cash as a special dividend or to use it to repurchase shares of the firm’s stock. You own 1,000 shares of Xtel stock. Assume that Xtel uses the entire $30 million to pay a special dividend. You are unhappy with Xtelʹs decision and would prefer that Xtel used the excess cash to repurchase shares. What is the number of shares that you would have to buy at ex-dividend price in order to undo the special cash dividend that Xtel paid?

There are two firms: Firm U and Firm L. Both firms have $30,000 total assets and $5,000 EBIT (earnings before interest and taxes). Firm U is an unlevered firm without debt, and its number of outstanding shares is 1,000. Firm L is a levered firm financed with 50% debt and 50% common equity. The firm plans to use the debt to repurchase 50% of the outstanding shares (Note: reduce the outstanding shares). The pre-tax cost of debt for Firm L is 10%. Both firms have a 20% corporate tax rate. Calculate the earnings per share (EPS) for the unlevered firm U.   A)$3.5 per share B)$5.0 per share C)$4.0 per share D)$5.6 per share