Northwestern Lumber Products currently has 16,500 shares of stock outstanding. Patricia, the financial manager, is considering issuing $129,000 of debt at an interest rate of 6.4 percent. Given this, how many shares of stock will be outstanding once the debt is issued if the break-even level of EBIT between these two capital structure options is $63,000? Ignore taxes. 14,337.71 shares 15,532.52 shares 12,289.47 shares. 13,381.87 shares 13,620.83 shares
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- Cross Town Cookies is an all-equity firm with a total market value of $780,000. The firm has 46,000 shares of stock outstanding. Management is considering issuing $197,000 of debt at an interest rate of 9 percent and using the proceeds to repurchase shares. Before the debt issue, EBIT will be $71,000. What is the EPS if the debt is issued? Ignore taxes. rev: 06_14_2019_QC_CS-170956 Multiple Choice $.98 $1.32 $1.55 $1.68 $1.79Northeast Lobster currently has 20,600 shares of stock outstanding. It is considering issuing $226,000 of debt at an interest rate of 8.2 percent. The break-even level of EBIT between these two capital structure options is $161,000. For this to be true, what is the current stock price? Ignore taxes.Southwest Sands currently has 22,000 shares of stock outstanding. It is considering issuing $128,000 of debt at an interest rate of 7.5 percent. The break-even level of EBIT between these two capital structure options is $74,000. How many shares of stock will be repurchased if the company undergoes the recapitalization? Ignore taxes. 2,446.33 shares 2,242.47 shares 3,091.89 shares 2,854.05 shares 2,711.35 shares
- Mayr Inc. currently has no debt in its capital structure. It has 50,000 shares outstanding that are selling for $158. The firm's expected EBIT is $400,000 and it pays 30% taxes. The managers are considering issuing $2,000,000 in debt. They will have to pay 4.50% interest on these bonds. They plan to use the proceeds of the bond issue to repurchase shares at the current market price. Calculate the EPS of the firm at both the original and relevered capital structures. If they execute the bond issue and share repurchase what will be the increase or decrease in EPS? EPS will remain the same. EPS will decrease by $0.26. EPS will decrease by $1.26. EPS will decrease by $2.31. EPS will increase by $0.21.Southwest Sands currently has 27,000 shares of stock outstanding. It is considering issuing $158,000 of debt at an interest rate of 8.3 percent. The break-even level of EBIT between these two capital structure options is $84,000. How many shares of stock will be repurchased if the company undergoes the recapitalization? Ignore taxes.The Greenbriar is an all-equity firm with a total market value of $551,000 and 21,700 shares of stock outstanding. Management is considering issuing $153,000 of debt at an interest rate of 9 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares will the firm repurchase if it issues the debt securities? Multiple Choice • 49,590 shares • 542 shares 6,026 shares 6,695 shares 7,304 shares
- Hotel Cortez is an all-equity firm that has 9,400 shares of stock outstanding at a market price of $30 per share. The firm's management has decided to issue $56,000 worth of debt and use the funds to repurchase shares of the outstanding stock. The interest rate on the debt will be 7 percent. What is the break-even EBIT? Multiple Choice $21,456 $19,806 $23,210 $16,976The Sweet Melon Corp. has total 100 shares trading on the market at $20 each.The book value of the total equity is $3500.The total market value of debt issurance is $4000.The expected return on total assets is 15% and the expected return on debt is 10%.What is the estimated return on equity? A.17.5% B.25% C.None of the choices D.18.3n Tina Black's Fabrics is currently an all equity firm that has 15,000 shares of stock outstanding at a market price of $12.50 a share. Company management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock at the market price. The interest rate on the debt will be 7%. Ignoring taxes, what is the earnings per share (EPS) at the break-even level of earnings before interest and taxes (EBIT)? O A. O B. O D. $1.143 O C. $1.500 SOE. $1.125 $0.875 $0.667 27/
- Executive Cheese has issued debt with a market value of $100.56 million and has outstanding 15.60 million shares with a market price of $10 a share. It now announces that it intends to issue a further $55.44 million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $60 million. a-1. Calculate the market price of the stock following the announcement. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2. How is the market price of the stock affected by the announcement? b. How many shares can the company buy back with the $55.44 million of new debt that it issues? (Do not round intermediate calculations. Enter your answer in millions. Round your answer to 1 decimal place.) c-1. What is the market value of the firm (equity plus debt) after the change in capital structure? (Do not round intermediate calculations. Enter your answer in millions. Round your answer…Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 per share. The current weighted average cost of capital is 7%. It also carries long-term debt of $200,000 at an interest rate of 7% p.a. One of the agenda items in its AGM is to switch to a D/E of 1. Based on this information, answer the following question: What is the level of EBIT at which shareholders will be indifferent between the two capital structures, the one with a D/E = 0.5/1 and the other with a D/E of 1?Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 pershare. The current weighted average cost of capital is 7%. It also carrieslong-term debt of $200,000 at an interest rate of 7% p.a. One of the agendaitems in its AGM is to switch to a D/E of 1. Based on this information,answer the following questions:a) What will be the number of outstanding shares for Jimmy Shoes Inc. ifit switches to a D/E ratio of 1? (Hint: Current Debt = $200,000,current equity = 10,000 shares x $40 = $400,000, current D/E = 2/4 =0.5/1. If the firm seeks to increase its D/E to 1, it can think ofborrowing more)b) What is the level of EBIT at which shareholders will be indifferentbetween the two capital structures, the one with a D/E = 0.5/1 and theother with a D/E of 1?