Ph Co. has an 8% debt with a book value of 8 M and a common stock of 8.5 M with outstanding shares of 370,000. The expected level of EBIT after the expansion is 3.5 M. The income tax rate is 25%. The firm is considering a 12 M expansion program using one of the following: Plan 1 - Incur additional debt at 10% interest; Plan 2 - Sell preferred shares with an 11.5% dividend yield; and Plan 3 - Sell new common stock at 25 per share. How much is the EPS for Plan 1?
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- Ph Co. has an 8% debt with a book value of 8 M and a common stock of 8.5 M with outstanding shares of 370,000. The expected level of EBIT after the expansion is 3.5 M. The income tax rate is 25%. The firm is considering a 12 M expansion program using one of the following: Plan 1 - Incur additional debt at 10% interest; Plan 2 - Sell preferred shares with an 11.5% dividend yield; and Plan 3 - Sell new common stock at 25 per share. How much is the EPS for Plan 1?IRIS Corp. has determined its optimal capital structure as follows. Debt: The firm can sell a 10-year, $1,000 par value, 7 percent bond for $950. A flotation cost of 3percent of the par value would be required in addition to the discount of $50. Preferred Stock: The firm has determined it can issue preferred stock at $45 per share par value. The stock will pay an $6.5 annual dividend. The cost of issuing and selling the stock is $2.5 per share. Common Stock: The firm's common stock is currently selling for $25 per share. The dividend expected to be paid at the end of the coming year is $3.75. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $1.45. It is expected that to sell, a new common stock issue must be underpriced at $2 per share and the firm must pay $0.75 per share in flotation costs. Additionally, the firm's marginal tax rate is 20 percent. Calculate the firm's weighted average cost of capital assuming the…Need answer
- Please help with this questionA firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Debt: The firm can sell a 20-year, $1,000 par value, 9 percent bond for $980. A flotation cost of 2 percent of the face value would be required in addition to the discount of $20. Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm's common stock is currently selling for $40 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45. It is expected that to sell, a new common stock issue must be underpriced at $1 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm's marginal tax rate is 40 percent.…Oranda Corp. has 1 million shares of stock outstanding. Oranda has a target capital structure with 60% equity and 40% debt. The company projects net income of P5 million and investment projects requiring P6 million in the upcoming year. QUESTION::a. Oranda uses the residual distribution model and pays all distributions in the form of dividends. What is the projected DPS? b. What is the projected payout ratio?
- IRIS Corp. has determined its optimal capital structure as follows: (ATTACHED) Debt: The firm can sell a 10-year, $1,000 par value, 7 percent bond for $950. A flotation cost of 3percent of the par value would be required in addition to the discount of $50. Preferred Stock: The firm has determined it can issue preferred stock at $45 per share par value. The stock will pay an $6.5 annual dividend. The cost of issuing and selling the stock is $2.5 per share. Common Stock: The firm's common stock is currently selling for $25 per share. The dividend expected to be paid at the end of the coming year is $3.75. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $1.45. It is expected that to sell, a new common stock issue must be underpriced at $2 per share and the firm must pay $0.75 per share in flotation costs. Additionally, the firm's marginal tax rate is 20 percent. Calculate the firm's weighted average cost of capital…A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions. Debt: The firm can obtain a 5-year loan from Colorful Bank for $2,500,000, at an annual rate of 10%. Preferred Stock: The firm has determined it can issue $100 par value preferred stock at $103 per share for a total of $3,500,000. The stock will pay a 10% annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm’s common stock is currently selling for $150 per share. The dividend expected to be paid at the end of the coming year is $15. Its dividend payments have been growing at a constant rate of 5%, total common stock is $4,000,000. Additionally, the firm’s marginal tax rate is 30 percent. The firm is currently studying the feasibility of investing in a machine worth $6,000,000 which will reduce cash operating costs for $2,600,000 yearly, it will have a 3-year life and will be depreciated on a straight-line…A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions. Debt: The firm can obtain a 5-year loan from Colorful Bank for $2,500,000, at an annual rate of 10%. Preferred Stock: The firm has determined it can issue $100 par value preferred stock at $103 per share for a total of $3,500,000. The stock will pay a 10% annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm’s common stock is currently selling for $150 per share. The dividend expected to be paid at the end of the coming year is $15. Its dividend payments have been growing at a constant rate of 5%, total common stock is $4,000,000. Additionally, the firm’s marginal tax rate is 30 percent. The firm is currently studying the feasibility of investing in a machine worth $6,000,000 which will reduce cash operating costs for $2,600,000 yearly, it will have a 3-year life and will be depreciated on a straight-line…
- A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions. Debt: The firm can obtain a 5-year loan from Colorful Bank for $2,500,000, at an annual rate of 10%. Preferred Stock: The firm has determined it can issue $100 par value preferred stock at $103 per share for a total of $3,500,000. The stock will pay a 10% annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm’s common stock is currently selling for $150 per share. The dividend expected to be paid at the end of the coming year is $15. Its dividend payments have been growing at a constant rate of 5%, total common stock is $4,000,000. Additionally, the firm’s marginal tax rate is 30 percent. The firm is currently studying the feasibility of investing in a machine worth $6,000,000 which will reduce cash operating costs for $2,600,000 yearly, it will have a 3-year life and will be depreciated on a straight-line…Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1.5 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.60 (given its target capital structure). Vandell has $8.57 million in debt that trades at par and pays a 7.4% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 5% a year. Vandell pays a 25% combined federal-plus-state tax rate, the same rate paid by Hastings. The risk-free rate of interest is 4%, and the market risk premium is 6%. Hasting’s first step is to estimate the current intrinsic value of Vandell.Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.25 (given its target capital structure). Vandell has $10.53 million in debt that trades at par and pays a 7.2% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 35% combined federal and state tax rate. The risk-free rate of interest is 7% and the market risk premium is 5%. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.3 million, $2.9 million, $3.5 million, and $3.51 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $10.53 million in debt (which has an 7.2% interest rate) and raise additional debt financing at the time of the…