Question 1:
Daddi Mac, Inc., doesn't face any taxes and has $246.8.0 million in assets: currently financed entirely with equity. Equity is worth 32 per share: and book value of equity is equal to market value of equity. Also: let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year. with the possible values of EBIT and their associated probabilities as shown below:
| State |
Recession |
Average |
Boom |
| Probability of state |
0.25 |
0.6 |
0.15 |
| Expected EBIT in state |
$5,646,600 |
$10,760,600 |
$17,727:000 |
The firm is considering switching to a 20-percent-debt capital structure and has determined that it would have to pay an 9 percent yield on perpetual debt in either event. What will be the level of expected EPS if the firm switches to the proposed capital structure? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Question 2:
Daddi Mac: Inc.: doesn't face any taxes and has $377.50 million in assets: currently financed entirely with equity. Equity is worth $40 per share: and book value of equity is equal to market value of equity. Also: let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year: with the possible values of EBIT and their associated probabilities as shown below:
| State |
Recession |
Average |
Boom |
| Probability of state |
0.25 |
0.55 |
0.20 |
| Expected EBIT in state |
$5,285,000 |
$11,325,000 |
$18,346,500 |
The firm is considering switching to a 20-percent-debt capital structure, and has determined that it would have to pay an percent yield on perpetual debt regardless of whether it changes the capital structure. What will be the standard deviation in EPS if the firm switches to the proposed capital structure? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Question 3:
1JBK: Inc.: normally pays an annual dividend. The last such dividend paid was $2.00: all future dividends are expected to grow at 6 percent: and the firm faces a required rate of return on equity of 11 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $16.50 per share that is not expected to affect any other future dividends: what should the stock price be? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Question 4:
Kenzie Cos. is expected to pay a dividend of $2.55 per year indefinitely. The appropriate rate of return on this stock is 16 percent per year, and the stock consistently goes ex-dividend 40 clays before dividend payment date.
What will be the expected minimum price in light of the dividend payment logistics? (Use 365 clays a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)
What will be the expected maximum price in light of the dividend payment logistics? (Use 365 clays a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)
Question 5:
Harper's Dog Pens: Inc.: with the help of its investment bank. recently issued 7.8 million shares of new stock. The offer price on the stock was $11.00 per share and Harper's received a total of $84.24 million from the stock offering.
Calculate the net proceeds per share and the underwriter's spread per share on the stock offering. (Round your answers to 2 decimal places.)
Net proceeds ___ per share
Underwriter's spread ___ per share
What percentage of the gross proceeds is the investment bank charging Harper's Dog Pens for underwriting the stock issue? (Round your answer to 2 decimal places.)
Question 6:
Renee's Boutique. Inc.: needs to raise $58.20 million to finance firm expansion. In discussions with its investment bank. Renee's learns that the bankers recommend a debt issue with an offer price of $1,000 per bond and they will charge an underwriter's spread of 8.0 percent of the gross price.
Calculate the net proceeds to Renee's from the sale of the debt. (Enter your answer in millions of dollars and round to 2 decimal places.)
Net proceeds to Renee's
How many bonds will Renee's Boutique need to sell in order to receive the $58.20 million it needs? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
Question 7:
Casey's One Stop has been approved for a $297,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 65 basis points, back-end fee = 40 basis points, and rate on the loan = 8.25 percent. Casey's expects to immediately take down $283:000 and no more during the year unless there is some unforeseen need.
Calculate the total interest and fees Casey's One Stop can expect to pay on this loan commitment. (Round your answer to 2 decimal places.)
Question 8:
You have approached your local bank for a start-up loan commitment for $390:000 needed to open a computer repair store. You have requested that the term of the loan be one year. Your bank has offered you the following terms: size of loan commitment = $390:000: term = one year. up-front fee = 25 basis points, back-end fee = 45 basis points: and rate on the loan = 9 percent. Assume you immediately take down $164:000 and no more during the year.
Calculate the total interest and fees you will pay on this loan commitment.
Question 9:
DiPitro's Paint and Wallpaper: Inc.: needs to raise $1.10 million to finance plant expansion. In discussions with its investment bank: DiPitro's learns that the bankers recommend a debt issue with gross proceeds of $1:000 per bond and they will charge an underwriter's spread of 5.0 percent of the gross proceeds.
How many bonds will DiPitro's Paint and Wallpaper need to sell in order to receive the $1.10 million it needs? (Do not round intermediate calculations and round your final answer to the nearest whole num her.)
Question 10:
The Fitness Studio; Inc.; with the help of its investment bank; recently issued 1.5 million shares of new stock. The offer price on the stock was $20.00 per share and The Fitness Studio received a total of $28;500.000 through this stock offering.
Calculate the net proceeds per share and the underwriter's spread per share on the stock offering. (Round your answers to 3 decimal places.)
What percentage of the gross price is the investment bank charging The Fitness Studio for underwriting the stock issue?