13 Boston Lumber is unlevered with 222 shares outstanding and earnings before interest and taxes, orEBIT, of 750. Corporate earnings are taxed at a rate of 31%. Suppose that Boston Lumber makes adecision to partition its assets into debt and equity by using the newly raised debt capital to buy back aportion of the stock. The firm issues $1550 of debt at a cost of 8.65%. The partition does not changeEBIT but reduces the number of shares outstanding to 147. Which of the following is Boston Lumber'sEPS after the partition?$1.91$2.89$5.10$2.33

Calculation of Boston Lumber's EPS after the partition.

Answered: Boston Lumber is unlevered with 222…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

See similar textbooks

Similar questions

The ABC company is unlevered (that means, it currently has no debt) and is valued at $150,551. There are currently 3,562 shares outstanding. ABC is currently deciding whether to include debt in its capital structure. If ABC repurchases 347 shares, what will be the new value of the firm? Assume no taxes.
Stockton Mineral Operations (SMO) currently has 310,000 shares of stock outstanding that sell for $94 per share. Assume no market imperfections or tax effects exist. Determine the share price and new number of shares outstanding if: Note: Do not round intermediate calculations. Round your price per share answers to 2 decimal places, e.g., 32.16, and shares outstanding answers to the nearest whole number, e.g., 32. SMO has a five-for-three stock split. SMO has a 11 percent stock dividend. SMO has a 39.0 percent stock dividend. SMO has a four-for-seven reverse stock split.
An entity reported an EBIT of $55,200.The firm finances its assets with $102, 000 debt (costing 5.7 percent) and $20,200 shares of stock selling at P11.00 per share. The firm is considering increasing its debt by $90,000, using the proceeds to buy back 77,000 shares of stock. The firm is in the 40 percent tax bracket. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $55,200. What is the EPS after the change in capital structure?
You may attempt this question 3 more times for credit Oak Farms is an unlevered firm with 2050 shares outstanding and an EBIT of 675. Corporate eamings are taxed at a rate of 31% Calculate EPS for Oak Farm Note: Your answer should be in dollars and cents. For example, $0.99 Suppose that Oak Farms makes a decision to partition (split) its assets into debt and equity. The firm issues $1550 of debit at a cost of 7.70%, and uses these funds to reduce the amount of equity on its books. The partition does not change the EBIT or the tax rate, but does reduce the number of shares outstanding to 1300 Note: Your answer should be in dollars and cents Compute Oak Farms EPS after the partition s You Must Get Both Parts Conect to Receive Credit CHECK ANSWER
Xijiang issued 1000 shares at the beginning of fiscal year (t=0), and the net profit at the end of fiscal year (t=1) is expected to be 2million won. (zhuxijiang plans to pay a total of 800000 won as dividends to shareholders at the end of the accounting year, and the rest will be retained for internal reinvestment. (Zhou) the average self capital profit margin (roe= current net profit of the accounting year / self capital at the beginning of the accounting year) of Xijiang in each accounting year will be maintained at 20%. (shares) Xijiang's dividend policy and self capital profit margin will continue to be maintained. The annual required rate of return (RRR) of the enterprise in the market is 16%. If the dividend growth rate (or profit growth rate) of the company is equal to the return on self capital (ROE) multiplied by the internal retention rate, please answer the following questions. The dividend discount model is used to calculate the stock price at the beginning of the…
The common stock and debt of Northern Sludge are valued at $66 million and $34 million, respectively. Investors currently require a return of 15.6% on the common stock and 8.1% on the debt. If Northern Sludge issues an additional $17 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes (do not round intermediate calculations. Enter your answer as a percent rounded to two decimal places).
General Accounting
Rally inc, is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and Rally plans to keep its outstanding debt equal to $10B permanently. Suppose Rally offers $2.75 per share to repurchase its shares. Would shareholders sell for this price?
Can anyone tell me why retained earning is eventually decreased by $25000.
Optimized Co. has a current period cash flow of $1.1 million and pays no dividends. The present value of the company's future cash flows is $13 million. The company is entirely financed with equity and has 610,000 shares outstanding. Assume the dividend tax rate is zero. a. What is the share price of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price b. Suppose the board of directors of the company announces its plan to pay out 50 percent of its current cash flow as cash dividends to its shareholders. Jeff Miller, who owns 1,300 shares of the company's stock, wants to achieve a zero payout policy on his own, by buying or selling shares. How many shares should he sell or buy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Number of shares to # 3 * 4 O werd % 5 a J 10 6 & 7 8 K◄◄
Sugar Skull Corporation uses no debt. The weighted average cost of capital is 8.3 percent. The current market value of the equity is $43 million and the corporate tax rate is 25 percent. What is the EBIT? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) EBIT
If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.

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