What will be the cost of equity after the repurchase?

An all-equity firm has expected earnings of $14,200 and a market value of $82,271. The firm is planning to issue $15,000 of debt at 6.3 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?

In considering Modigliani & Miller’s (M&M) Propositions I and II in a world with no taxes and no bankruptcy risk, assume Firm A is an all-equity firm with a required return on its assets (Ra) of 10%. Firm B is a levered firm and can borrow in the debt market at 7% (Rd). If M&M’s proposition II holds, what is the cost of equity and the WACC if Firm B is levered to 50% debt: is this capital structure better for Firm B? Show your calculations.

Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? The stock price should be $ (Round to the nearest cent.) A b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cont.) c. Assume you bought Covan stock at the beginning of…

A) Suppose that Facebook has earnings per share (expected next year) of $6.20 and that Facebook’s discount rate for equity is 12%. If Facebook is not expected to grow at all, what would Facebook’s share price be? Do not include the $ sign and answer to the nearest $0.01.    B) Instead, Facebook is trading at $160 per share. What is the present value of Facebook’s growth opportunities per share? Do not include the $ sign and answer to the nearest $0.01.