How much common stock could firm repurchase? Ridley Energy Inc. is owned by a group of private investors.The firm earned $4,200,000 after taxes this year. With 1.2million shares outstanding, earnings per share were $3.50.The stock has recently been trading at $80 per share amongcurrent shareholders. Four dollars of this value is attributedto investor anticipation of a cash dividend. As the financialmanager of Ridley Energy, you are evaluating the alternativeof repurchasing some company common stock by means ofa tender offer at $80 per share. How much common stockcould the firm repurchase if this alternative were selected?

To determine how much common stock Ridley Energy Inc. could repurchase, we need to analyze the…

Answered: Ridley Energy Inc. is owned by a group…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

What is your capital gains yield on this investment for this financial accounting question?
You have been asked to value Brilliant Enterprises, a publicly traded IT services firm, and have collected the following information: After-tax operating income last year = $100 million Net income last year = $82.5 million Book value of equity at start of this year = $750 million Book value of debt at start of this year = $250 million Capital expenditure last year = $80 million Depreciation last year = $30 million Increase in non-cash working capital last year = $10 million a) Assuming that Brilliant Enterprises will maintain its return on capital and reinvestment rate from last year for the next 3 years, estimate the free cash flow for the company for each of the next 3 years. b) After year 3, Brilliant expects its growth rate to decline to 3% and the return on capital to be 9% in perpetuity. Assuming that its cost of capital is 8%, estimate the terminal value at the end of the third year. c) Assuming that Brilliant has a cost of capital of 10% for the next 3…
What is the dollar return on your investment of this financial accounting question?
You are reviewing the valuation of Vulcan Enterprises, a private business. The analyst has estimated a value of $ 2.0 million for the company, which is in stable growth and expected to grow 3% a year in perpetuity. The firm has no debt outstanding and is expected to generate an after-tax operating income of $300,000 next year; the return on capital is anticipated to be 15%. The analyst valued the company for a private-to-private transaction, and the cost of equity he estimated is correct, given that setting. (He used a total beta to estimate the cost of equity, a risk-free rate of 4%, and an equity risk premium of 5%).However, the buyer is a publicly-traded firm with diversified investors. The average R-squared across publicly traded companies in this business is 25%. Estimate the correct value of Vulcan Enterprises for sale to a public buyer.
Bhupatbhai
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $3200 million in assets with $30.00 million in debt and $200 million in equity. LotsofEquity, Inc. finances its $32.00 million in assets with $2.00 million in debt and $30.00 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Debt ratio LotsofDebt, Inc. LotsofEquity, Inc. Calculate the equity multiplier. (Round your answers to 2 declmal places.) Equity multiplier LotsofDebt, Inc. times LotsofEquity. Inc, times Calculate the debt-to-equity. (Round your answers to 2 decimal places.) Debt-to-equity LotsofDebt, Inc. times LotsofEquity. Inc. times pe here to search W 59°F Mostly cloudy DELL
You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical EBITDA of $15.5 million and operating income of $8.5 million. AllDebt, Inc., finances its $55 million in assets with $54 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $55 million in assets with no debt and $55 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the income available to pay the asset—funders’ investment—(the debt holders and stockholders) and resulting return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places.) AllDebt AllEquity Income available for asset funders million million Return on asset-funders' investment % %
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.3 million and operating income of $16.5 million. NoEquity, Inc., finances its $75 million in assets with $74 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $75 million in assets with no debt and $75 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) Net income Return on assets NoEquity million % NoDebt million %
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.5 million and operating income of $14.5 million. NoEquity, Inc., finances its $50 million in assets with $49 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $50 million in assets with no debt and $50 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets—funders’ investments—for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) NoEquity. NoDebt Net income million million Return on assets % %
Vijay
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.4 million and operating income of $15.5 million. NoEquity, Inc., finances its $70 million in assets with $69 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $70 million in assets with no debt and $70 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets-funders' investments-for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) Answer is not complete. NoEquity Net income $ 0.000 million Return on assets % NoDebt million %
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $32.50 million in assets with $30.25 million in debt and $2.25 million in equity. LotsofEquity, Inc. finances its $32.50 million in assets with $2.25 million in debt and $30.25 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Calculate the equity multiplier. (Round your answers to 2 decimal places.) Calculate the debt-to-equity. (Round your answers to 2 decimal places.)

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning