Problem 1Duke & Duke currently has 4.5million shares of stock outstanding and willreport earnings after taxes of $6.8 million inthe current year. The company has hiredGoldman Sachs as the lead underwriter andis considering the issuance of 800, 000additional shares that will sell to the publicfor $36 per share, with a 6.25%underwriting spread.A) Calculate the netprice per share to the corporation that Duke& Duke will receive. B) How much will Duke& Duke receive from the sale of additionalshares in total net proceeds?C) Calculatethe Earnings Per Share before the stockissue.D)d. Calculate the Earnings Per Shareimmediately after the issue.E) What will theearnings per share be if the company canearn 9.25% on the total net proceeds of thestock issue in time to include it in thecurrent year's earnings. F) Should Duke &Duke proceed with the issuance of newshares?

A) Net Price Per Share to the Corporation:The net price per share to the corporation is calculated…

Answered: Problem 1Duke & Duke currently has 4.5…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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FMCG Inc an all equity firm with 9200 shares outstanding with 70 percent payout is considering a capital structure with 35% debt. The current trading price of the stock is $45 and a constant Earnings before interest and taxes equal to $85.000. If the interest rate on new debt is 6 percent and there are no taxes. If you own $9000 worth of stock in the company, what would be your cash flow with the change in the capital structure? 1. No of shares owned by you initially (before the change in capital structure) 2. Net income and EPS after change in capital structure 3. What will be your total cash flow after change in capital structure
A company with EBIT of $6,000,000 is considering two financing alternatives. The first alternative would have $25 million of bonds at 8% interest and 1,000,000 common shares outstanding, whereas the second would have $47.5 million of bonds at 8% interest and only 750,000 shares outstanding. The company is in the 35% tax bracket. Required: Part 1: Construct the bottom half of the income statement (including EPS) for each financing alternative when EBIT is at $6,000,000. Part 2: Construct the bottom half of the income statement (including EPS) for each alternative if EBIT increases by 20%. Part 3: Construct the bottom half of the income statement (including EPS) for each alternative if EBIT decreases by 20%. Part 4: What is the EBIT/EPS indifference point for this firm?
question 2 a) Fr berhad has 6.5 million shares of common stock outsdanding with a market price of RM14 per share. This company has a market value of RM10 million outstanding preferred stock. their corporate bonds outstanding is 25,000 with face value of RM1000 and selling at 90% of face value on the bond market.The cost of equity is 14%, the cost preferred is 10% and the pre- tax cost of debt is 7.5%. Their marginal corporate tax rate is 30%. i) Calculate the market value for common stoc preferred stock, corporate bond and firm. ii)calculate the firm's Weightage average cost of capital (WACC).
1. Warephase Corporation has preferred stock outstanding. The stock has a 16% dividend rate. The stock's market price is $80 per share, and its par value is $75. If new shares are issued, the firm will pay $3.50 per share in flotation costs. The corporate tax rate is 21%. What is the company's cost of preferred stock financing? O 12.40% O 16.73% O 13.46% 9.12% 15.69%
Answer in excel format and explain formulas used.
WACC
↑ Valence Electronics has 229 million shares outstanding. It expects earnings at the end of the year of $770 million. Valence pays out 40% of its earnings in total - 15% paid out as dividends and 25% used to repurchase shares If Valence's earnings are expected to grow by 7% per year, these payout rates do not change, and Valence's equity cost of capital is 9%, what is Valence's share price? OA. $53.80 OB. $10.09 OC. $67.25 OD. $20.18 Gme
Payday Inc.wants to issue $2 million of debt @ 5% to either issue a dividend or complete a share repurchase. The stock is currently trading at $25 per share and there are 500,000 shares outstanding. The tax rate is 20%. What would be the new share price if Payday Inc. used the debt to complete a buyback? What would be the new share price if Payday Inc. issued a dividend? What would be the new shares outstanding if Payday Inc. repurchased shares? What would be the new shares oustanding if Paycheck Inc. issued a dividend?
n Tina Black's Fabrics is currently an all equity firm that has 15,000 shares of stock outstanding at a market price of $12.50 a share. Company management has decided to issue $60,000 worth of debt and use the funds to repurchase shares of the outstanding stock at the market price. The interest rate on the debt will be 7%. Ignoring taxes, what is the earnings per share (EPS) at the break-even level of earnings before interest and taxes (EBIT)? O A. O B. O D. $1.143 O C. $1.500 SOE. $1.125 $0.875 $0.667 27/
#18
Caribbean Power Supply Limited has the following capital structure:i. Debt 40%ii. Preferred shares 10%iii. Common shares 50%The company is issuing preferred stock at $130 per share with a stated dividend of $16.75 and aflotation cost of 5%. For its common stock, Caribbean Power expects the next dividend paymentto be $3.30 per share. The price of its common stock is currently $22 and it is estimated that thefirm will grow at a constant rate of 5%. Also, the cost of debt for is 12% and the tax rate is 40%.A. Compute the cost of debt, preference share and common stock for Caribbean PowerSupply Limited. B. Calculate the Weighted Average Cost of Capital (WACC). C. Comment on the WACC computed at B. D. Discuss FOUR (4) problems this company might face as a result of being highly geared.
三= Chapter 17, Comprehensive Problem, Jets Corporation Jet Corporation currently has 120,000 shares outstanding that are selling at $55 per share. It needs to raise $800,000. Net income after taxes is $400,000. Its vice president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 12 percent, 22 percent, and 42 percent have been suggested. Common stock is the sole means of financing for the Jets Согрoration. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. (Round to one place after the decimal point where necessary.) b. Determine the value of one right under each of the plans. (Round to two places after the decimal point.) Compute the earnings per share before and immediately after the rights offering under a С. 10 percent discount from the market price. d. By what…

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