Best Bagels, Inc. (BB) Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $130,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 25%. The firm has 30,000 shares of common stock outstanding selling at a price per share of $25. Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital structure to a new capital structure with 40% debt and 60% equity. This results in a weighted average cost of capital equal to 11.7% and a new value of operations of $833,333. Assume BB raises $333.333 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase? Remaining shares; Stock price after repurchase O a. 23,500; $35.71 Ob. 21,800; $34.34 O c. 18,000; $27.78 O d. 20,800; $31.51 Oe. 19,400; $29.44

Best Bagels, Inc. (BB) Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $130,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 25%. The firm has 30,000 shares of common stock outstanding selling at a price per share of $25. Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital structure to a new capital structure with 40% debt and 60% equity. This results in a weighted average cost of capital equal to 11.7% and a new value of operations of $833,333. Assume BB raises $333.333 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase? Remaining shares; Stock price after repurchase O a. 23,500; $35.71 Ob. 21,800; $34.34 O c. 18,000; $27.78 O d. 20,800; $31.51 Oe. 19,400; $29.44

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Baker Industries’ net income is $26000, its interest expense is $6000, and its tax rate is 40%. Its notes payable equals $26000, long-term debt equals $70000, and common equity equals $255000. The firm finances with only debt and common equity, so it has no preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. What are the firm’s ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations. ROE fill in the blank 2% ROIC fill in the blank 3% Please don't provide image based solution thanks
baker industries net income is $24,000 ,its interest expense is $6000, and its take rate is 40%. it notes payable equals 23,000 , long term debt equals 70,000, and common equity equals 240,000. the firm's finances with only debt and common equity, so it has no preferred stock. What is the firm’s ROE and ROIC ?
Charisma, Inc., has debt outstanding with a face value of $5.1 million. The value of the firm if it were entirely financed by equity would be $22 million. The company also has 370,000 shares of stock outstanding that sell at a price of $47 per share. The corporate tax rate is 21 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Financial distress costs
The W.C. Pruett Corp. has $600,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 7%. In addition, it has $600,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.7 million, its average tax rate is 25%, and its profit margin is 7%. What are its TIE ratio and its return on invested capital (ROIC)?
(Related to Checkpoint 4.3) (Profitability analysis) Last year the P. M. Postem Corporation had sales of $405,000, with a cost of goods sold of $112,000. The firm's operating expenses were $125,000, and its increase in retained earnings was $76,440. There are currently 21,000 shares of common stock outstanding, the firm pays a $1.56 dividend per share, and the firm has no interest-bearing debt. a. Assuming the firm's earnings are taxed at 35 percent, construct the firm's income statement. b. Compute the firm's operating profit margin. a. Assuming the firm's earnings are taxed at 35%, construct the firm's income statement. Complete the income statement below: (Round to the nearest dollar.) Income Statement Revenues Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expense Earnings before Taxes Income Taxes Net Income GA SA ...
Broward Manufacturing recently reported the following information: Net income $770,000 ROA 7% Interest expense $292,600 Accounts payable and accruals $1,000,000 Broward's tax rate is 40%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations. Round your answers to two decimal places. ВЕР % ROE % ROIC
Supercool Inc is currently an unlevered firm with 1,000 outstanding shares. It expects togenerate $1,600 in EBIT in perpetuity. The tax rate is 35%. All earnings after tax are paid outas dividends. The firm is considering a capital restructuring for which the company will issue$3,000 of debt to buy back shares. Its cost of debt is 10%. Unlevered firms in the sameindustry have a cost of equity of 20%. The capital restructuring is going to take place onemonth after its announcement. What is the share price of Supercool on the day before andafter the restructuring completion?
Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $80,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. Refer to Exhibit 16.1. Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase? A) $45.90 B) $48.12 C) $51.06 (D) $53.33 (E) $58.75
Appliances, Inc. has no debt outstanding, and its financial position is given by the following data: Assets (market value = book value) $5,000,000 EBIT $800,000 Cost of equity 12% Stock price $10 Shares outstanding 500,000 Tax rate 25% The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 20% debt based on market values, its cost of equity will increase to 13% to reflect the increased risk. Bonds can be sold at a cost of 6%. Appliance, Inc. is a no-growth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time. As a creditor, you are concerned about the company’s ability to repay its debt and interest. What is the new times interest earned?
Broward Manufacturing recently reported the following information: $507,000 10% Interest expense $187,590 $1,050,000 Accounts payable and accruals Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations. Round your answers to two decimal places. Net income ROA BEP: ROE: ROIC: % % %
The most recent financial statements for Mandy Company are shown below: Balance Sheet $ 32,000 Debt 93,200 Equity $ 125,200 Total Income Statement Sales Costs Taxable income Tax (218) Net Income $91,200 Current assets 66,150 Fixed assets $ 25,050 5,261 Total $ 19,789 Sustainable growth rate Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 35 percent dividend payout ratio. No external equity financing is possible. What is the sustainable growth rate? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. $ 42,000 83,200 $ 125,200 %
Baker Industries’ net income is $26000, its interest expense is $5000, and its tax rate is 45%. Its notes payable equals $25000, long-term debt equals $70000, and common equity equals $260000. The firm finances with only debt and common equity, so it has no preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What are the firm’s ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations.

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