UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Chapter 13, Problem 21QP
a.
Summary Introduction
To determine: The Maximum Price per Share.
Introduction: The
The cost of debt is the effective interest rate of cost which a business earns on their current debts. Debt involves in the formation of capital structure. As the debt is considered as a deduction expenditure, the cost of debt is usually determined as after-tax cost in order to formulate similar to the cost of equity.
a.
Expert Solution
Answer to Problem 21QP
The Maximum Price per Share is $62.17
Explanation of Solution
Determine the Total Market Value
Therefore the Total Market Value is $52,000,000
Determine the Weight of Debt and Equity
Therefore the Weight of Debt is 26.92% and Equity is 73.08%
Determine the WACC of the Company
Therefore the WACC of the Company is 9.04%
Determine the Cash Flow from Assets
Using a excel spreadsheet we compute the cash flow from assets as,
Excel Spreadsheet:
Excel Workings:
Determine the Terminal Value at the end of Year 5
Therefore the Terminal Value at the end of Year 5 is $192,947,048.74
Determine the Total Market Value of the Company
Using a excel spreadsheet we calculate the total value of company as,
Excel Spreadsheet:
Excel Workings:
Therefore the Total Market Value of the Company is $161,238,529.11
Determine the Total Market Value of Equity
Therefore the Total Market Value of Equity is $121,238,529.11
Determine the Maximum Price per Share
Therefore the Maximum Price per Share is $62.17
b.
Summary Introduction
To determine: The New Estimate of Maximum Price per Share.
b.
Expert Solution
Answer to Problem 21QP
The Maximum Price per Share is $64.92
Explanation of Solution
Determine the Earnings Before Interest on Taxes, Depreciation and Amortization (EBITDA)
Therefore the Earnings Before Interest on Taxes, Depreciation and Amortization (EBITDA) is $26,564,630
Determine the Terminal Value at the end of Year 5
Therefore the Terminal Value at the end of Year 5 is $212,517,040
Determine the Total Market Value of Company
Using a excel spreadsheet we calculate the total value of company as,
Excel Spreadsheet:
Excel Workings:
Therefore the Total Market Value of Company is $166,594,155.69
Determine the Total Market Value of Equity
Therefore the Total Market Value of Equity is $126,594,155.69
Determine the New Estimate of Maximum Price per Share
Therefore the New Estimate of Maximum Price per Share is $64.92
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Chapter 13 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 13 - Project Risk If you can borrow all the money you...Ch. 13 - WACC and Taxes Why do we use an aftertax figure...Ch. 13 - SML Cost or Equity Estimation If you use the stock...Ch. 13 - SML Cost or Equity Estimation What are the...Ch. 13 - Prob. 5CQCh. 13 - Cost of Capital Suppose Tom OBedlam, president of...Ch. 13 - Company Risk versus Project Risk Both Dow Chemical...Ch. 13 - Prob. 8CQCh. 13 - Leverage Consider a levered firms projects that...Ch. 13 - Beta What factors determine the beta of a stock?...
Ch. 13 - Calculating Cost of Equity The Dybvig Corporations...Ch. 13 - Prob. 2QPCh. 13 - Calculating Cost of Debt Shanken Corp. issued a...Ch. 13 - Calculating Cost of Debt For the firm in the...Ch. 13 - Calculating WACC Mullineaux Corporation has a...Ch. 13 - Taxes and WACC Miller Manufacturing has a target...Ch. 13 - Finding the Capital Structure Farnas Llamas has a...Ch. 13 - Book Value versus Market Value Filer Manufacturing...Ch. 13 - Calculating the WACC In the previous problem,...Ch. 13 - Prob. 10QPCh. 13 - Finding the WACC Given the following information...Ch. 13 - Finding the WACC Titan Mining Corporation has 8.7...Ch. 13 - SML and WACC An all-equity firm is considering the...Ch. 13 - Calculating Flotation Costs Suppose your company...Ch. 13 - Calculating Flotation Costs Southern Alliance...Ch. 13 - WACC and NPV Och, Inc., is considering a project...Ch. 13 - Prob. 17QPCh. 13 - Flotation Costs Goodbye, Inc., recently issued new...Ch. 13 - Calculating the Cost of Equity Floyd Industries...Ch. 13 - Firm Valuation Schultz Industries is considering...Ch. 13 - Prob. 21QPCh. 13 - Flotation Costs and NPV Photochronograph...Ch. 13 - Flotation Costs Trower Corp. has a debt-equity...Ch. 13 - Project Evaluation This is a comprehensive project...Ch. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Go to www.reuters.com and find the list of...Ch. 13 - You now need to calculate the cost of debt for...Ch. 13 - You now have all the necessary information to...Ch. 13 - You used Tesla as a representative company to...
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