User Account

All Pages

Shares of common stock outstanding selling

Assignment Help Finance Basics
Reference no: EM131050184

Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.

Refer to Exhibit 16.3. Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?

a. 11,001; $28.85

b. 12,711; $35.62

c. 15,220; $54.31

d. 17,105; $89.67

e. 13,901; $42.57

Reference no: EM131050184

Questions Cloud

Corresponding minimum acceptable return on equity : A company's acceptable minimum return on capital (i.e., WACC) is 12%. If the debt/equity ratio is 1:1, and the after-tax cost of debt is 5% (the company is in the 40% tax bracket), what is the corresponding minimum acceptable return on equity?
Conduct a ratio analysis of coral systems : Conduct a ratio analysis of Coral Systems' and Spatial Technology past income statements and balance sheets for year of 1994 and 1995.
Happens to the price of the bond : If the industry becomes more risky and the market now requires a 12% rate or return, what happens to the price of the bond? Assume this happens immediately after the bond is released.
Differences between cash flow and accounting income : 1. What are the differences between cash flow and accounting income? Why it is important to use cash flow in making capital budgeting decisions?
Shares of common stock outstanding selling : Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock ou..
What common messages or themes contained in these articles : What are common messages or themes contained in these articles? What are conflicting messages or themes contained in these articles?
Assume the population standard deviation : Formulate a hypothesis statement for the following claim: "The average delivery time is less than 30 minutes." A sample of 42 deliveries had an average time of 26.9 minutes. Assume the population standard deviation is 8 minutes. Using α = 0.01, te..
What are the primary difficulties experienced in the design : What are the primary difficulties experienced in the design of project reports?
What is the purpose of earned value : What is the purpose of "earned value"? How would the progress of the project as a whole be calculated?

Reviews

Write a Review

Finance Basics Questions & Answers

  Examine ethical behavior within firms in relation

Examine ethical behavior within firms in relation to financial management. Provide at least two (2) recent (in the last 5 years) examples (do not include Enron, WorldCom, Bernie Madoff, etc.) of companies that have been guilty of ethics-based ..

  How much would shulas profit increase

Each steak dinner sells for $12.40 each. How much would Shula's profit increase if 10 more dinners were sold?

  How are organizational information systems

How are organizational information systems related to company strategy? How does strategy affect the information systems a company develops and uses?

  Since the fed has no direct influence over the bond market

since the fed has no direct influence over the bond market explain why indirectly monetary policy can move the long

  Operating budget performance

Discuss  the factors that contribute to a successful operating budget performance.

  In general short-term forecasts are more accurate than

in general short-term forecasts are more accurate than long-term forecasts as are forecasts where cyclical or seasonal

  Estimate the number of electrons transferred

A polythene piece rubbed with wool is found to have a negative charge of 3 × 107 C.

  Main points and arguments of the author

Your task is to offer a detailed critique of a peer-reviewed article. The article must be related to explaining how political developments and movements have influenced the practice of budgeting and financial management in the public sector. In yo..

  If the decision is made by selecting the project with the

bilulu inc. is considering projects s and l whose cash flows are shown below. these projects are mutually exclusive

  Calculation of debt ratio and total asset turnover ratio

Calculation of Debt Ratio and Total Asset Turnover Ratio and Compute the following ten financial ratios and provide a one sentence explanation of the analytic use of each ratio test. Show your formulas and input.

  What role does a counter-cyclical play

Diagram the business cycle and the effects on individual industries. Why is an index measuring Christmas sales so important? Is the business cycle controllable? What role does a counter-cyclical play?

  If we consider outsourcing in purely financial terms it is

if we consider outsourcing in purely financial terms it is easy to ignore the ethical issues that might be associated

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd