?? JTM Enterprises has an issue of preferred stock with a par value of $200. The preferredstock pays a 7% dividend, and investors demand a 6.25% rate of return. Additionally, JTMEnterprises incurred $5,000 in maintenance costs last year. What price should the preferredstock sell for? Sunrise Retailers Ltd. has 6,500 shares of 7%, $25 par cumulative preferredstock, and 120,000 shares of $3 par common stock outstanding. Preferred dividends are 1year in arrears. The board of directors has approved a $3.00 cash dividend on each share ofcommon stock. The company also had a $2,000 legal settlement that does not affectdividends.

JTM Enterprises' Preferred Stock Information:Par Value = $200Dividend Rate = 7% (annual…

Answered: JTM Enterprises has an issue of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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Prediction Inc.'s perpetual preferred stock sells for $102.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? a. 9.33% b. 8.72% c. 7.26% d. 7.17% e. 8.64%
Walker Machine Tools has 6.3 million shares of common stock outstanding. The current market price of Walker common stock is $68 per share rights-on. The company’s net income this year is $21.50 million. A rights offering has been announced in which 630,000 new shares will be sold at $62.50 per share. The subscription price plus six rights is needed to buy one of the new shares.a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) earnings per share price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal…
Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is $82 per share rights-on. The company's net income this year is $25.00 million. A rights offering has been announced in which 700,000 new shares will be sold at S76.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round Intermedlate calculatlons and round your answers to 2 declmal places.) b. What would the earnings per share be immediately after the rights offering? What would the price- earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round Intermedlate calculatlons and round your answers to 2 decimal places.)
bosio inc perpetual preferred stock sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?
Walker Machine Tools has 5.6 million shares of common stock outstanding. The current market price of Walker common stock is $54 per share rights-on. The company’s net income this year is $18.00 million. A rights offering has been announced in which 560,000 new shares will be sold at $48.50 per share. The subscription price plus four rights is needed to buy one of the new shares.a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your…
Lumber Corp's common stock trades at a price of $47.24 per share. The most recent dividend was $1.28 per share and it is expected to grow by 4% per year. Flotation costs for common stock have been estimated at 6%, while bonds and preferred stock are sold in private placements and have negligible flotation costs. The company's preferred stock is selling at $88.97 and has an annual dividend of $4. Lumber Corp. has bonds outstanding with an average coupon rate of 12% and an average yield to maturity of 8%. The firm's optimum capital structure is 40% equity, 20% preferred stock and 40% debt, and its tax rate is 32%. What is the (after-tax) cost of debt? What is the cost of preferred stock? What is the cost of retained earnings? What is the cost of new common stock? What is the weighted average cost of capital, assuming the company doesn't have to issue any new common stock?
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Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72 per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000 new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings…
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,300 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,300 worth of stock. Ignore taxes. Assets Liabilities and Equity Cash $ 8,000 Debt $ 11,500 Fixed assets 29,500 Equity 26,000 a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $32,300 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $32,300 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $32,300 a year,…
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,300 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,300 worth of stock. Ignore taxes. Assets Liabilities and Equity Cash $ 8,000 Debt $ 11,500 Fixed assets 29,500 Equity 26,000 a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $32,300 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $32,300 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $32,300 a year,…

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