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The company Tabaco Inc. with the shareholders equity shown below declares a stock dividend of 16 percent.
The market value of its common stock is €110 per share, while the par value is 3.
Common stock 100.000 €
Capital surplus 2.450.000 €
Retained earnings 1.000.000 €
Total owners’ equity 3.550.000 €
How many shares are they going to issue?
What is the new statement of shareholders Equity?
Mistery Inc. has 3 million shares of stock outstanding that sell for €99 per share.
Imagine there are no taxes, what will be the price per share and the new number of shares outstanding after:
A five-for-three stock split?
A 20 percent stock dividend?
A three-for-seven reverse stock split?
Valencia Industrial Orange corporation. has a target capital structure of 40 percent common stock.
Its cost of equity is 13 percent, and the cost of debt is 5 percent.
You are requested to prepare a DCF calculation considering that the investment takes place in Spain, where the applicable tax rate is 25%, find the required discount rate.
Derby is willing to invest in a new electric car automated production channel with a cost of €60 Million, the expected life of 7 years.
The tax rate is 25%, and Derby is considering whether to buy or lease the production Channel, assuming that they could borrow a loan from the bank at the interest of 6 percent.
The request an offer from La Caixa leasing services that requests an annual lease price of €10,7 Million.
What would you advise them to do, explain all the calculation steps and what is the process?
The company Noland Inc has 2.5 million common shares outstanding, and they have a new project in mind, the investment needed is €11 million.
The current Corp.’s stock price is 45.
Noland is debating between two scenarios:
What are the ex-rights stock price, the value of a right, and the appropriate subscription prices under scenarios 1 and 2?
Personal income taxes are used to fund a variety of public programs. First, conduct research on what programs are funded by personal income taxes. Present one program you think is a good use of your income taxes and explain why. Next, present one program you do not think is a good use of your income taxes and explain why. apa format 7thed, minimum a 250 word words, please include a turn it in report or will be forced to refund
Coca-Cola Corporation has acquired Pepsi-Cola in a merger transaction.
The fixed Assets of Coca-Cola have a market value of 10 Billions, the market values for the other assets are the same as book values.
The market value for Pepsi-Cola fixed assets is 400 Billions, the market values for the other assets are the same as book values.
Assume that Coca-Cola issues 800 Billions in new long-term debt to finance the acquisition.
The following balance sheets represent the premerger book values.
Coca-Cola
Current assets 100 € Current liabilities 95 €
Other assets 50 € Long-term debt 15 €
Net fixed assets 200 € Equity 240 €
Total 350 € 350 €
Pepsi-Cola
Current assets 95 € Current liabilities 80 €
Other assets 60 € Long-term debt 300 €
Net fixed assets 250 € Equity 25 €
Total 405 € 405 €
Prepare the balance sheet for the new corporation if the merger is treated as a purchase for accounting purposes.
Rojo y Negro restaurants, Inc., has a target debt–equity ratio of 50%. Its WACC is 12 percent, and the tax rate is 25 percent.
If the cost of equity is 22 %, what is its pretax cost of debt?
CASE : COST OF CAPITAL AND EXPECTED RETURN
1. SML and WACC. An all- equity is considering the following projects:
Project Beta Expected return
W 0.8 6
X 0.7 5
Y 1.15 9
Z 1.7 13
The T-bill rate is 3% and the expected return on the market is 7.5%
a) Which projects have a higher expected return than the firm’s 12% cost of capital? (10 points)
b) Which project should be accepted? (30 points)
c) Which projects would be incorrectly accepted or rejected if the firm’s overall cost of capital were used as a hurdle rate?
CASE 2: COST OF CAPITAL
Given the following information for Huntington Power, find the WACC. Assume the company’s tax rate is 28%.
• Debt: 40.000 with 7% coupon bond outstanding, $100 par value, 20 years to maturity, selling for 103% of par; the bonds make semi-annual payments
• Equity: 90.000 shares outstanding selling for $57 per share; the beta is 1,10
• Market: 8% market risk premium and 6% risk free rate