Check my work Data Number of shares Price per share Market value of shares 2,500 25 $ 62,500 Although it expects to have an income of $3,000 a year in perpetuity, this income is not certain. This table shows the return to stockholders under different assumptions about operating income. We assume no taxes. Outcomes Operating income ($) 2,e00 2,500 3,e00 3,500 Suppose that Macbeth Spot Removers issues only $6,750 of debt and uses the proceeds to repurchase 270 shares. The interest rate on the debt is 7%. a. Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. (Input all values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return on shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole niumhor)
Check my work Data Number of shares Price per share Market value of shares 2,500 25 $ 62,500 Although it expects to have an income of $3,000 a year in perpetuity, this income is not certain. This table shows the return to stockholders under different assumptions about operating income. We assume no taxes. Outcomes Operating income ($) 2,e00 2,500 3,e00 3,500 Suppose that Macbeth Spot Removers issues only $6,750 of debt and uses the proceeds to repurchase 270 shares. The interest rate on the debt is 7%. a. Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. (Input all values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return on shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole niumhor)
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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Transcribed Image Text:Check my work
Data
Number of shares
Price per share
Market value of shares
2,500
%24
$ 62,500
25
Although it expects to have an income of $3,000 a year in perpetuity, this income is not certain. This table shows the return
to stockholders under different assumptions about operating income. We assume no taxes.
Outcomes
Operating income ($)
2,000
2,500
3,000
3,500
Suppose that Macbeth Spot Removers issues only $6,750 of debt and uses the proceeds to repurchase 270 shares. The
interest rate on the debt is 7%.
a. Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. (Input all
values as a positive number. Round your "Earnings per share" answers to 2 decimal places. Enter your "Return on
shares" answers as a percent rounded to 2 decimal places. Round the other answers to the nearest whole number.)
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Check my work
La IyS poi Siiaio V
Return on shares (%)
b. If the beta of Macbeth's assets is 1.10 and its debt is risk-free, what would be the beta of the equity after the debt issue?
(Round your answers to 2 decimal places.)
All-equity beta
Debt beta
D/E ratio
Equity beta
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