Wayne, Inc., wishes to expand its facilities. The company currently has 6 million sharesoutstanding and no debt. The stock sells for $28 per share, but the book value per shareis $8. Net income is currently $4.2 million. The new facility will cost $42 million, and it willincrease 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

Calculation of New Book Value per share:

Answered: Wayne, Inc., wishes to expand its…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

See similar textbooks

Similar questions

Witham, Inc. estimates that its retained earnings break point (BPRE) is $32 million, and its WACC is 11.2 percent if common equity comes from retained earnings. However, if the company issues new stock to raise new common equity, it estimates that its WACC will rise to 12.4 percent. The company is considering the following investment projects: Project A BUDE C Size $10 million A. $38 million B. $28 million C. $18 million D. $32 million E. None of the above 8 million 10 million 10 million 7 million What is the firm's optimal capital budget? IRR 14.0% 16.5 12.2 15.4 11.8
Enterex Corporation expects sales of $437,500 next year. Enterex’s profit margin is 4.8% and its dividend payout ratio is 40%. What is Enterex’s projected increase in retained earnings for next year? Multiple Choice $8,400 $12,600 $14,700 $21,000 $262,500 None of the options are correct. Time sensitive!
Calvert Corporation expects an EBIT of $25,500 every year forever. The company currently has no debt, and its cost of equity is 15.4 percent. The company can borrow at 10.2 percent and the corporate tax rate is 21 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-1. What will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c-1. What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? (Do not round intermediate calculations and round your answers to 2 decimal places,…
Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock 20 percent of valueOperating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?
A firm that is currently unlevered has WACC = rS = 10%/year. This company plans to do a recapitalization by issuing debt and repurchasing equity. After the recapitalization, the debt-to-equity (D/E) ratio will be 0.5. If the cost of debt, rD, is 6%, what will be rS after the recapitalization?
Al-Shamukh Constructors Ltd. currently has sales of OMR 21 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock is 20 percent of value. Operating cost (excludingt cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rat of return on asset in percentage? a. 6.53 O b. -8.04 Oc 6.4 O d. 7,44 e. -7.14 Ot None is correct
A company expects EPS to be $1 next year. The industry average P/E ratio is 3 and Enterprise multiple is 7.71. The EBITDA for the company is $37.61 million. The firm has debt and preferred stock of $4 million and 10 million shares outstanding. What is an estimate of the firm value using the method of comparables for enterprise multiple? Express your answer in millions of dollars rounded to two decimal places (for example, if you get $12,540,000, input 12.54 as your answer)
Dyrdek Enterprises has equity with a market value of $1.8 million and the market value of debt is $3.55 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 1.6 percent. The new project will cost $2.20 million today and provide annual cash flows of $576,000 for the next 6 years. The company's cost of equity is 11.07 percent and the pretax cost of debt is 4.88 percent. The tax rate is 21 percent. What is the project's NPV?
The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed with 40% debt. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.
Wazir Ali Corporation expects next year’s net income to be $15 million. The firm’s debt ratio is currently 35%. Wazir has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. Required According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wazir’s dividend payout ratio be next year? (solve in excel)
Calvert Corporation expects an EBIT of $25,100 every year forever. The company currently has no debt, and its cost of equity is 15.2 percent. The company can borrow at 10 percent and the corporate tax rate is 24 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-1. What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-2. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)c-1. What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,…
Start - Up Industries is a new firm that has raised $210 million by selling shares of stock. Management plans to earn a 20% rate of return on equity, which is more than the 15% rate of return available on comparable - risk investments. Half of all earnings will be reinvested in the firm. What will be Start - Up's ratio of market value to book value? Note: Do not round intermediate calculations. What will be Start - Up's ratio of market value to book value if the firm can earn only a rate of return of 10% on its investments? Note: Do not round intermediate calculations. Round your answer to 1 decimal place.

SEE MORE QUESTIONS

Recommended textbooks for you

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

SEE MORE TEXTBOOKS