Assuming the following: 1.4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Outstanding debt Of $150mm 8. After-tax cost of debt of 6% 9. Current share price of $125 10. Tax rate of 25% 11. EBITDA Multiple of 7x.
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- The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company’s stock currently trades at $60 per share. Compute the stock’s earnings per share (EPS). What is the stock’s P/E ratio? Determine what the stock’s dividend yield would be if it paid $1.75 per share to common stockholders.Assume Skyler Industries has debt of $4,500,000 with a cost of capital of 7.5% and equity of $5,500,000 with a cost of capital of 10.5%. What is Skylers weighted average cost of capital?Assuming the following: 1. 4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Current share price of $125 8. Tax rate of 25% 9. EBITDA Multiple of 7x. What is the market value of equity? A form of the correct answer would be $53mm.
- EXAMPLE 5: Calculate the Return on equity from the following data. OMR Net Profit after Tax 6,00,000 10% Debentures (OMR 10 each) 10,00,000 Equity Share Capital (OMR 10 per share) 10,00,000 COMMENTSProblem 1 Assume that ABC Corporation earns a net income of 10 million for the current period. The corporation also needs Br 8 million for new investments for the next period. Suppose the target capital structure of debt to equity ratio is one to three ratios. Based on this, determine the amount of dividend to be paid based on the residual dividend policy? Beob omQuestion Please provide the solutions and the correct answers. thank you! 2. The Delta Company projects the following for the upcoming year: Earnings before interest and taxes = P40 millionInterest expense = P 5 millionPreferred stock dividends = P 4 millionCommon stock dividend payout ratio = 20%Average number of common shares outstanding = 2 millionEffective corporate income tax rate = 40% The expected dividend per share of common stock isa. P1.70b. P1.86c. P2.10d. P1.00 3. Following are selected data taken from the records of Jemson Company:Income before tax = P200,000Income tax rate = 40%Dividend payout ratio = 0.80Number of common shares outstanding = 10,000 shares How much dividends per share did the company pay during the year?a. P9.60b. P6.40c. P16d. P15
- Assume Meyer Corporation is 100 percent equity financed. Calculate the return on equity, given thefollowing information:Earnings before taxes 1,500Sales 5,000Dividend payout ratio 60%Total assets turnover 2Tax rate 30%7. Use the following data for the WACC-related questions below. Target capital structure: 15% debt, 10% preferred, 75% common equity Current common stock price: $76.00 Next year's dividend on common stock: $3.50 Constant growth rate: 6% Proceeds of new common stock net of flotation costs: $72.20 Before-tax cost of debt: 11% Marginal tax rate: 25% Preferred stock dividend: $4.50 Preferred stock price: $50.00 Retained earnings: $5,400,000 Using the data above, calculate the following: Cost of common equity using retained earnings Cost of common equity using new common stock Cost of preferred stock WACC using retained earnings WACC using new common stock Break point for common equity Flotation cost (%)Credenza Industries is expected to pay a dividend of $1.50 at the end of the coming year. It is expected to sell for $61 at the end of the year. If its equity cost of capital is 9%, what is the expected capital gain from the sale of this stock at the end of the coming year? .... O A. $57.34 O B. $5.04 OC. $55.96 O D. $3.66 ..
- Assume the following data for U&P Company: Debt (D) = $100 million; Equity (E) = $300 million; rD = 6%; rE = 12%; and TC = 30%. Calculate the after-tax weighted average cost of capital (WACC): Multiple Choice A) 10.5% B) 10.05% C) 15% D) 9.45%Assume a company has 10mm outstanding shares of stock that currently trade at $50 per share. Assume the company cost of equity is 18% and its after-tax cost of debt is 6%. Assume the company has $250mm in long term debt and $50mm of other liabilities. What is the WACC?Assume that Firm A is an all-equity firm with total assets of $1,000 and the following distribution of EBIT for the coming year: Probability EBIT Interest EBT Taxes (40%) Net Income BEP ROA ROE 1.99% 2.79% 3.49% Firm A (Unlevered) 2.32% 2.83% Bad 30% $120 SO $120 $48 $72 12.0% 7.2% Economy Average Now assume As you can calculate, the standard deviation of the ROE distribution is 1.39 percen that the firm plans to issue $300 of debt, at an interest rate of 10 percent, and use the proceeds to repurchase equity (you may ignore potential impacts on price and assume that the firm will then have $700 of equity). Determine the standard deviation of the new ROE distribution if the firm does issue this debt. 40% $150 $0 $150 -$60 $90 Good 30% $180 SO $180 -$72 $108 15.0% 18.0% 9.0% 10.8% 9.0% 10.8%