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Stock repurchase The Off-Shore Steel Company has earnings available for common stockholders of $2 million and has 500,000 shares of common stock out-standing at $60 per share. The firm is currently contemplating the payment of $2 per share in cash dividend.
a) calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio.b) if the firm can repurchase stock at $62 per share, how many shares can be purchased in lieu of making the proposed cash dividend payment?c) how much will the EPS be after the proposed repurchase? why?d) if the stock sells at the old P/E ratio, what will the market price be after repurchase?e) compare the contrast the earnings per share before and after the proposed repurchase.f) compare the contrast the stockholders' position under the dividend and repurchase alternative.
Differentiate between the different users of financial information.
A firm plans to purchase equipment for $1.5 million. It will cost 200,000 to modify it for use in the firm's facility. The equipment is in the 3-year MACRS class. Calculate depreciation expense for Year 3.
A 10-year bond, with par value equals $1000, pays 10 percent yearly. If similar bonds are currently yielding 6 percent yearly, calculate the market value of the bond.
Is the DCF approach or the market multiple approach best for valuing a business? Are there conditions when one approach is preferred over the other?
What is the interest rate should fall to 4.5%? Rise to 8.5%? Why does the price go up when interest rates fall? Why does the price go down when interest rates rise?
What TVM concept (s) is represented in the situation? What is the value of the money represented by the situation? How did you arrive at the value?
Fly-by-night Couriers is analyzing the possible acquisition of Flash-in the pan Restaraunts. Neither firm has debt. The forecasts of Fly-by-night show that the purchase would increase its annual after-tax cash-flow by $600,000 indefinately.
Solve the LPP obtained in (a) graphically by using iso-pro t lines in order to conclude how framer Jones could maximize the total revenue from wheat and corn. What is the maximum rev- enue?
An HMO has a Point of Service (POS) option for its members, but will pay only 80 percent of approved charges. If a member goes out of network for a medical procedure with a charge of $2,000, of which $1,200 is approved, how much must the member pa..
Suppose on January 1 you deposit $100 in an account that pays a nominal, or quoted interest rate of 11.33463%,with interest added (compounded) daily.
The firm tries to maintain a 20 percent debt and 80 percent equity of its planned capital expenditures and does not plan to issue more stock. The firm estimates to earn 12 million in the next year.
If the firm's cost of capital is 12%, what are the project's net present value and internal rate of return?
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