PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 14, Problem 8PS
a.
Summary Introduction
To compute: The profit obtainable to common shareholders.
b.
Summary Introduction
To compute: The profit obtainable to common shareholders after payment of tax and dividend.
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See Table 2.5
showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
Q1. Alpha Corporation reported the following financial details for the
financial year 2021. Revenue is $250 million. EBITDA margin is 45%, EBIT
margin is 25%. D&A is $10 million. Interest expense is $5 million. Interest &
dividend income is $15 million. The firm sold an asset that has a book value
of $33 million, for $30 million. The tax rate applicable for the firm is 20%. The
basic number of shares were 5 million, and diluted number of shares were
5.25 million.
a) Show the required workings to determine the basic EPS and diluted EPS
for 2021.
b) The Board of Directors of Alpha Corporation decided to declare 40% of
net income as dividend for the financial year 2021. An investor holds 350
shares of Alpha Corporation. Determine the dividend income received by the
investor. How much funds will be added to the retained earnings account for
2021.
a) Table below shows the simplified balance sheet information for Jess Elton Enterprise. The debt has just been
refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company's
shares is 15%. There are 7.46 million shares outstanding, and the shares are trading at $46. The tax rate is 35%.
Calculate this company's weighted-average cost of capital (WACC) based on the market weighted scheme.
1,500 Short-term debt
75,600
Cash and marketable
securities
Accounts receivable
Inventory
Current assets
Property, plant, and
equipment
Other assets
Total
120,000 Accounts payable
125,000
Current liabilities
246,500
302,000 Long-term debt
89,000 Shareholders' equity
637,500
Total
62,000
137,600
208,600
637,500
246,300
b) Discuss the different funding strategies a company may follow in order to finance its cumulative working capital
requirements.
Chapter 14 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 14 - Terminology Fill in the blanks, using the...Ch. 14 - Prob. 2PSCh. 14 - Sources of funds True or false? a. Net stock...Ch. 14 - Prob. 4PSCh. 14 - Company ownership What do we mean when we say that...Ch. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Corporate debt Which of the following features...Ch. 14 - Financial markets and intermediaries. True or...
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