Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Simone's sweets is an all-equity firm that has 6700 shares of stock outstanding at a market price of $18 per share. The firm's management has decided to issue $56000 worth of debt at an interest rate of 6 percent. The funds will be used to repurchase shares of the outstanding stock. What are the earnings per share at the break--even EBIT?arrow_forwardThe common stock of Etar Company currently sells for $32.50 per share. In an attempt to determine whether Etar Company is fairly priced, you have assembled the following information: - The before-tax required rates of return on Etar debt, preferred stock and common stock are, respectively, 7.0%, 6.8%, and 11.0%. - The company's target capital structure is 30% debt, 15% preferred stock, and 55% common stock. - The market value of the company's debt is $145 million, and its preferred stock is valued at $65 million. - Etar's FCFF for the year just ended is $32 million. FCFF is expected to grow at a constant rate of 5% for the foreseeable future. - The tax rate is 30%. - Etar has 7.5 million outstanding common shares. What is Etar's estimated common stock value per share? Group of answer choices $76.00 $98.55 $82.02 $55.82 $64.29arrow_forwardThe total book value of WTC's equity is $13 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 9%. The firms bonds have a face value of $9 million and sell at a price of 110% of face value. The yield to maturity on the bonds is 7% andthe firm's tax rate is 21%. What is the company's WACC? (Don't round intermediate calculations, enter final answers as a percent rounded to 2 decimal places.)arrow_forward
- This question is not incomplete. you need to calculate the cost of equity. I need Answer for the question number d and e. thanks Blooming Ltd. currently has the following capital structure:Debt: $2,500,000 par value of outstanding bond that pays annually 12% coupon rate with an annual before-tax yield to maturity of 10%. The bond issue has face value of $1,000 and will mature in 25 years.Ordinary shares: 65,000 outstanding ordinary shares. The firm plans to pay a $7.50 dividend per share in the next financial year. The firm is maintaining 3% annual growth rate in dividend, which is expected to continue indefinitely.Preferred shares: 40 000 outstanding preferred shares with face value of $100, paying fixed dividend rate of 14%.Company tax rate is 30% Required: Complete the following tasks:a) Calculate the current price of the corporate bond? b) Calculate the current price of the ordinary share if the average return of the shares in the same industry is 9%? c) Calculate the current value…arrow_forwardABC Trucking's balance sheet shows a total of noncallable $30 million long-term debt with a coupon rate of 6.80% and a yield to maturity of 8.10%. This debt currently has a market value of $48 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity is $213.00 million. The current stock price is $23.80 per share; stockholders' required return, rs, is 15.05%; and the firm's tax rate is 36.00%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between the WACCs using market value and the book value?Work with at least 4 decimals and round your final answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. Group of answer choices –0.46% –0.49% –0.44% –0.34% –0.36%arrow_forwardCharter Corp. has issued 1,554 debentures with a total principal value of $1,554,000. The bonds have a coupon interest rate of 9%. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter is in a 39% corporate tax bracket, what is the company's net after-tax interest cost associated with this bond issue?arrow_forward
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