Reference no: EM13871288
Green Manufacturing, Inc., plans to announce that it will issue $2,000,000 of perpetual bonds and use these funds to repurchase equity. The bonds will have a 6-percent coupon rate. Green manufacturing currently is an all-equity firm. The current value of Green’s equity is $10,000,000 and there are 500,000 shares outstanding. After the sale of bonds and share repurchase, Green will maintain the new capital structure indefinitely. Under its current capital structure the expected annual pretax earnings for Green are $1,500,000, and these earnings are expected to remain constant into the foreseeable future. Green is in the 40-percent tax bracket.
(a) What will Green’s weighted average cost of capital be before the debt issue?
(b) Construct Green’s market-value balance sheet as it looks before the announcement of the debt issue.
(c) Construct the market-value balance sheet after the announcement and provide your brief explanation for the change in it.
(d) How many shares of stock will Green repurchase?
(e) Construct the market-value balance sheet after the debt issue and share repurchase are completed
|
What amount did extreme fitness expect to collect
: Show how the company would have reported its receivable accounts on December 31, 2014. As of that date, what amount did Extreme Fitness expect to collect? Prepare the journal entry to write off the accounts on January 2, 2015.
|
|
What would be your estimate of equity beta of firm
: We want to determine cost of equity for Firm A. We know that Firm A’s target debt-to equity ratio is 2.00. We also know that there is a comparable firm which has exactly same lines of business and therefore is expected to have the same level of busin..
|
|
The net ionic equation for: barium chloride
: The net ionic equation for: Barium Chloride + Potassium Iodate, Barium Chloride + Lead (ii) Nitrate, Potassium Iodate + Sodium Chloride, and Potassium Iodate + Sodium Hydroxide
|
|
Stock price to be immediately after the announcement
: A firm currently has no debt. The firm has 15 million shares outstanding and those shares currently have a market price of $25 per share. The firm is contemplating selling $50 million in bonds and using the proceeds to repurchase shares of stock. do ..
|
|
Weighted average cost of capital be before the debt issue
: Green Manufacturing, Inc., plans to announce that it will issue $2,000,000 of perpetual bonds and use these funds to repurchase equity. The bonds will have a 6-percent coupon rate. Green manufacturing currently is an all-equity firm. What will Green’..
|
|
Examine dna structure and function gene
: Examine DNA structure, and function, gene
|
|
What is the value of fun toys debt and equity
: Fun Toy Corporation estimates that there is 30% chance of a recession economy next year, a 40% chance of a normal economy next year, and a 30% chance of a boom economy next year. What is the value of Fun Toy’s debt? What is the value of Fun Toy’s equ..
|
|
Show supporting computations in good form
: On January 1, 2009 Mykoo Corporation issued $1 million in five year, 10% serial bonds to be repaid in the amount of $200,000 on January 1, 2010, 2011, 2012, 2013, and 2014. Interest is payable at the end of each year.
|
|
Assume the same facts as stated in d8- 4 except
: Assume the same facts as stated in D8- 4 except that the Pension Trust Fund is operated by a five member board of directors. Before the end of the current fiscal year three of the board members terms expire.
|