Assignment: Business Finance
Case: M&M Pizza.
I. What is going on at M&M Pizza? How do the financial statements for M&M Pizza vary with the proposed repurchase plan? Do the alternative policies improve the expected dividends per share?
II. Describe the companies current WACC, and capital structure choices. It seems obvious that debt is the cheaper source of funds. Why is the company willing to pay 8% on equity when it could borrow at 4%?
III. What impact does the repurchase plan have on M&M's weighted-average cost of capital? Complete the table below (No Corporate Taxes). What are the debt and equity claims worth under the alternative scenarios? You may note that the present value of a perpetual cash flow stream is equal to the expected payment divided by the associated required return. Which proposal is best for investors, discuss your results in your explanation? What do you recommend that Miller do?
IV. How would your analysis in and recommendation in question 3 change if the new tax law is implemented? Please note that, with corporate taxes, the expected debt-to-equity ratio under the share repurchase plan is 0.588, and the number of remaining shares outstanding is 39.4 million. Complete the same table as in question 3 with a tax rate of 20%.
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.
Attachment:- Case-MM-Pizza.rar