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An all-equity business has 100 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonabley low and decides to execute a dividend recapitalization (a recap). It will raise $1 billion in debt and repurchase 50 million shares. 1. What is the market value of the firm prior to the recap? What is the market value of equity? 2. Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity? 3. Do equity shareholders appear to have gained or lost as a result of the recap? Please explain. 4. Assume now that the recap increases total firm cash flow, which adds $100 million to the value of the firm. Now what is the market value of the firm? What is the market value of equity? 5. Do equity shareholders appear to have gained or lost as a result of the recap in this revised scenario?
Calculate company total asset turnover
Which bond suffers the greatest percentage price decline? Why? Which suffers the least percentage price decline? Why?
Why would a multinational be willing to issue a bond in a foreign country and what would be the motivation? How can they attempt to minimize their risk is they do issue these bonds?
Rhetorix, corporation produces stereo speakers.The selling price per pair of speakers is $900. The variable cost of production is $300 and fixed cost per month is $60,000.
Bill plans to have $1,200,000 for his retirement in 40 years. How much should he save annually if he thinks he can earn an average of 6% a year on his investments?
If the company chooses to drill today, what is the project's net present value? Round your answer to four decimal places.
According to the Expectations Hypothesis, what is the expected one-year rate in the marketplace for year 2?
Assume George invests $83,497 in a 2 year CD with an Annual (Nominal) Interest Rate of 3.8% and 4 compoundings per year. Calculate the APY (Annual Percentage Yield/Effective Rate). Enter your response rounded to the nearest thousandth percent.
Project cost $23 million, generate cash flows $14,000,000, $11,750,000 and $6350,000 over next 3 years. Cost of capital is 20%. what is internal rate of return?
You want yo buy a new sports coupe for $84,600 and the finanace offer at the dealership has quoted you 7.1 percent APR loan for 48 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?
The project requires an initial investment in net working capital of $285,000 and the fixed asset will have a market value of $225,000 at the end of the project.
according to MM proposition I with taxes, what would be the increase in the value of the company after the loan?
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