Arizona Seafood, Inc., plans $45 million in new borrowing to repurchase 3,600,000 shares at their market price of $12.50. The yield on the new debt will be 12%. The company has 36 million shares outstanding and EPS of $0.60 before the repurchase. The company's tax rate is 40%. The company's EPS after the share repurchase will be closest to: Show calculations
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- A new company plans to obtain P18 million financing. The company expects to obtain a yearly income of P2 million before interest and taxes. The firm is considering issuing bonds or an equal amount of bonds and preferred stock. The interest rate on bonds is 14 percent. The tax rate is 46 percent. What financing strategy would you recommend?? (with forecasted income statement)A new company plans to obtain P18 million financing. The company expects to obtain a yearly income of P2 million before interest and taxes. The firm is considering issuing bonds or an equal amount of bonds and preferred stock. The interest rate on bonds is 14 percent. The tax rate is 46 percent. What financing strategy would you recommend??Kelly Corporation is considering the issuance of either debt or preferred stock to finance the purchase of a facility costing P1.5 million. The interest rate on the debt is 16 percent. Preferred stock has a dividend rate of 12 percent. The tax rate is 46 percent. REQUIREMENTS: 1. What is the annual interest payment? 2. What is the annual dividend payment? 3. What is the required income before interest and taxes to satisfy the dividend requirement??
- LALAMOVE Trucking Inc. is expected to generate EBIT of $5 million annually in perpetuity (starting in one year). LALAMOVE is all equity financed and shareholders require a return of 11%. The corporate tax rate is 35%. LALAMOVE is proposing to issue $5 million of perpetual bonds with an annual coupon of 6%. The company uses the $5M of debt to repurchase stock at $15.65 per share. Assume that, after borrowing the $5M, LALAMOVE never increases or decreases its debts. What is the share price after the new debt issue?Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.Bruce & Co. expects its EBIT to be $165,000 every year forever. The company currently has no debt but can borrow at 8.6 percent while its cost of equity is 14.7 percent. The tax rate is 21 percent. The company is planning to borrow $55,000 and use the loan proceeds to repurchase shares. What will be the WACC after recapitalization? Select one: 14.57 percent 15.07 percent 14.51 percent 14.11 percent 14.58 percent
- The Maximus Corporation is considering a new investment, which would be financed from debt. Maximus could sell new $1,000 par value bonds at a new price of $939. The bonds would mature in 15 years, and the coupon interest rate is 9.5%. Compute the after-tax cost of capital to Maximus for bonds, assuming a 34% tax rate. Show work pleaseLinkcomn expects an Eamnings after Taxes of 7500005 every year. The firm currently has 100% Equity and cost of raising equity is 12%. If the company can borrow debt with an interest of 10% What will be the value of the company if the company takes on a debt equal to 60% of its unlevered value? What will be the value of the company if the company takes on a debt equal to 50% of its levered value? Assume the company's tax rate is 30% (Must show the steps of calculation)The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed with 55% debt. Wei has $8 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.
- Cede & Co. expects its EBIT to be $83,929 every year forever. The firm can borrow at 11%. Cede currently has no debt, and its cost of equity is 23%. The tax rate is 34%. What is the firm’s WACC after borrowing $45,000 and using the proceeds to repurchase shares (i.e., after recapitalization)? Answer in percentage terms and round to 2 decimal places.Sorenson Systems, Inc. is expected to pay a dividend of $3.30 at year end (D1), the dividend is expected to grow at a constant rate of 5.5% a year, and the common stock currently sells for $37.50 a share. The before-tax cost of debt is 7.5%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC if all the equity is used from retained earnings?Your answer should be between 7.36 and 12.57, rounded to 2 decimal places, with no special characters.Suppose that LilyMac Photography expects EBIT to be approximately $230,000 per year for the foreseeable future, and that it has 1,000 10-year, 9 percent annual coupon bonds outstanding. What would the appropriate tax rate be for use in the calculation of the debt component of LilyMac's WACC? Tax rate 37 %