Company B's board is meeting to decide how to pay out $20 million in excess cash to shareholders. The company has 10 million shares outstanding, no debt, faces an equity cost of capital = WACC = 12%, and expects to generate future free cash flows of $48 million per year forever that will be paid out to shareholders as dividends each period. Calculate each shareholders' wealth if the company decides to pay out the $20 million excess cash immediately by repurchasing stock. ( Hint: shareholder wealth = value of equity holding plus cash from repurchase.)

Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock. If Dynamo wishes to change its capital structure from 75 percent to 60 percent equity, according to M&M Proposition 1, what are the interest payments that you receive after you undo the restructuring, and what are your total cash flows? (Do not round intermediate calculations. Round the final answer to two decimal places.) O $1.58 and $12.38 O $23.55 and $75 O $1.125 and $12.38 O $23.55 and $12.38

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $30 million gaming center: a. Issue $34 million of 6% bonds at face amount.b. Issue 1 million shares of common stock for $34 per share. 1. Assuming bonds or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. (Enter your answer in dollars, not millions. (i.e., $5.5 million should be entered as 5,500,000). Round your "Earnings per Share" to 2 decimal places. Round your "Earnings per Share" to 2 decimal places.)   Issue Bonds Issue stock   Operating income 10,900,000 10,900,000 Interest expense (bonds only)     Income before tax     Income tax expense (40%)     Net Income     Number of shares 3,900,000 4,900,000 Earnings per share

Mitsui Ltd has 1 million issued shares and expects unlevered after-tax cash flows of $300,000 every year, forever. The company is all-equity financed, and its cost of capital is 12% p.a. The company's tax rate is 30%. The company has just announced its intention to borrow an additional $1,400,000 of perpetual debt (at a 7% p.a. interest rate) and use the proceeds to repurchase shares? a) Calculate the price per share of Mitsui Ltd immediately before the repurchase announcement. b) Calculate the price of a share in Mitsui Ltd immediately after the repurchase announcement but before the new borrowings occur (assuming that the market expects repurchase to occur with certainty and that there are no other information effects).  c) Calculate the cost of equity capital for Mitsui Ltd after the share repurchase (ignoring other information effects).

Berea Resources is planning a$75million capital expenditure program for the coming vear. Next year, Berea expects to report to the IR5 earnings of s40 milion after interest and tanes The company presently has 22 milion shares of commoo stock issued and outstanding. Dividend payments are expected to increase from the present level of s8 millon co 512 manion, The company expects its current asset needs to increase from a current level of$22millon to$27malion, Current liabilibes, exduding short-tern bank berrowirgs, are expected to incease from$13million to$18milion. Interest payments are s5 milion next year, and long-term debt retiremert obligations are$6million next year. Deoreciation next year is expectad to be$16million on the company's financial statements, but the company will report depreciation of$19million for tax purposes. How much extemal financing is required by Berea for the coming yean? Enter your answer in malions. For example, an answer of tt milion should be enternd as 1,…

Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment.   After making the investment, Kohwe expects to earn free cash flows of $10 million each year.   Kohwe currently has 5 million shares outstanding, and has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe's future free cash flows is 8%, and the only capital market imperfections are corporate taxes and financial distress costs.   a. What is the NPV of Kohwe's investment?   b. What is Kohwe's share price today?   Suppose Kohwe borrows the $50 million instead. The finn will pay interest only on this loan each year, and maintain an outstanding balance of $40 million on the loan. Suppose that Kohwe's corporate tax rate is 35%, and expected free cash flows are still $9 million each year.   c. What is Kohwe's share price today if the investment is financed with debt?   Now suppose that with leverage, Kohwe's expected free cash flows wiH decline to $8 million per year due…

Seattle Adventures, Incorporated, is trying to decide between the following two alternatives to finance its new $17 million gaming center: a. Issue $17 million, 6% note. b. Issue 1 million shares of common stock for $17 per share with expected annual dividends of $1.02 per share. Required: 1. Assuming the note or shares of stock are issued at the beginning of the year, complete the income statement for each alternative. 2. Answer the following questions for the current year: (a) By how much are interest payments higher if issuing the note? (b) By how much are dividend payments higher by issuing stock? (c) Which alternative results in higher earnings per share?

A company just issued $140000 of perpetual 9% debt and used the proceeds to repurchase stock. The company expects to generate 121000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 10% and the tax rate is 40%. Use FTE to calculate the value of the company's equity. Your Answer: Answer

The Giant Machinery has the current capital structure of 65% equity and 35% debt. Its net income in the current year is $250 000. The company is planning to launch a project that will requires an investment of $175 000 next year. Currently the share of Giant machinery is $25/share. Required:   1.How much dividend Giant Machinery can pay its shareholders this year and what is dividend payout ratio of the company. Assume the Residual Dividend Payout Policy applies?   2. If the company is paying a dividend of $2.50/share and tomorrow the stock will go ex-dividend. Calculate the ex-dividend price tomorrow morning. Assuming the tax on dividend is 15%?   3. Little Equipment for Hire is a subsidiary in the Giant Machinery and currently under the liquidation plan due to the severe contraction of operation due to corona virus. The company plans to pay total dividend of $2.5 million now and $ 7.5 million one year from now as a liquidating dividend. The required rate of return for shareholders is…

round to the nearest cent