N2 Permian Partners (PP) produces from aging oil fields in west Texas. Production is currently 1.91 million barrels per year, but is declining at 8% per year for the foreseeable future. Costs of production, transportation, and administration add up to $26.10 per barrel. The current oil price is $66.10 per barrel. PP has 8.1 million shares outstanding. The cost of equity is 10%. All of PP’s

N2 Permian Partners (PP) produces from aging oil fields in west Texas. Production is currently 1.91 million barrels per year, but is declining at 8% per year for the foreseeable future. Costs of production, transportation, and administration add up to $26.10 per barrel. The current oil price is $66.10 per barrel. PP has 8.1 million shares outstanding. The cost of equity is 10%. All of PP’s

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 12P

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Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.96 million barrels per year in 2018, but production is declining at 8% per year for the foreseeable future. Costs of production, transportation, and administration add up to $26.60 per barrel. The average oil price was $66.60 per barrel in 2018.PP has 8.6 million shares outstanding. The cost of capital is 10%. All of PP’s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $26.60. Also, ignore taxes.a. Assume that oil prices are expected to fall to $61.60 per barrel in 2019, $56.60 per barrel in 2020, and $51.60 per barrel in 2021. After 2021, assume a long-term trend of oil-price increases at 6% per year. What is the ending 2018 value of one PP share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-1. What is PP’s EPS/P ratio? (Do not round intermediate calculations.…
Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.81 million barrels per year in 2018, but production is declining at 8% per year for the foreseeable future. Costs of production, transportation, and administration add up to $25.10 per barrel. The average oil price was $65.10 per barrel in 2018. PP has 7.1 million shares outstanding. The cost of capital is 10%. All of PP's net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $25.10. Also, ignore taxes. a. Assume that oil prices are expected to fall to $60.10 per barrel in 2019, $55.10 per barrel in 2020, and $50.10 per barrel in 2021. After 2021, assume a long-term trend of oil-price increases at 6% per year. What is the ending 2018 value of one PP share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Share value 2016 L b-1. What is PP's EPS/P ratio? (Do not round…
Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.92 million barrels per year in 2018, but production is declining at 9% per year for the foreseeable future. Costs of production, transportation, and administration add up to $26.20 per barrel. The average oil price was $66.20 per barrel in 2018.PP has 8.2 million shares outstanding. The cost of capital is 11%. All of PP’s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $26.20. Also, ignore taxes.a. Assume that oil prices are expected to fall to $61.20 per barrel in 2019, $56.20 per barrel in 2020, and $51.20 per barrel in 2021. After 2021, assume a long-term trend of oil-price increases at 7% per year. What is the ending 2018 value of one PP share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b-1. What is PP’s EPS/P ratio? (Do not round intermediate calculations.…
**Please solve using Excel and show formulas.** Permian Partners (PP) produces from aging oil fields in west Texas. Production is 1.97 million barrels per year in 2018, and it will be stable for the foreseeable future. Costs of production, transportation, and administration add up to $26.70 per barrel. The average oil price was $66.7 per barrel in 2018, and it will not change in the future. PP has 8.7 million shares outstanding. The cost of capital is 11%. All of PP’s net income is distributed as dividends. For simplicity, assume that the company will stay in business forever and that costs per barrel are constant at $26.70. Also, ignore taxes. Given more time you would compute the net income for 2019, which is 62,744,500. Assume that this net income will remain constant for the foreseeable future (there will be no growth in the net Income). Question: What is the ending 2018 value of one PP share? Multiple Choice $71.9 $64.1 $68.6 $70.9 $65.6
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Wayne, Inc., wishes to expand its facilities. The company currently has 6 million shares outstanding and no debt. The stock sells for $28 per share, but the book value per share is $8. Net income is currently $4.2 million. The new facility will cost $42 million, and it will increase net income by $810,000. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. (Do not round intermediate calculations
Marker, Incorporated, wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $53. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. The par value of the stock is $1 per share. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. Assume the stock price is constant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Calculate the new total earnings. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a-3. Calculate the new EPS. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a-4. Calculate the new stock price. Include…
Harbor Co. has produced boat supplies for over 20 years. The company currently has a debt-equity ratio of 65 percent and the tax rate is 24 percent. The required return on the firm's levered equity is 13 percent. The company is planning to expand its production capacity. The equipment to be purchased is expected to generate the following unlevered cash flows: Year 0 1 2 3 Cash Flow -$ 19,800,000 5,900,000 9,700,000 9,000,000 The company has arranged a debt issue of $9.9 million to partially finance the expansion. Under the loan, the company would pay interest of 6 percent at the end of each year on the outstanding balance at the beginning of the year. The company also would make year-end principal payments of $3,300,000 per year, completely retiring the issue by the end of the third year. Show Transcribed Text a. What is the value of the unlevered project (VU)? b. What is the present value of the project (VL)? c. What is the net present value of the project (NPV)?
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