1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
kap26 [50]
3 years ago
13

Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero gro

wth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08. Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase? a. 12,711; $35.62 b. 11,001; $28.85 c. 17,105; $89.67 d. 15,220; $54.31
Business
1 answer:
nevsk [136]3 years ago
4 0

Answer:

b. 11,001; $28.85

Explanation:

EBIT $100,000

zero growth rate

Cost of equity (Re) 13%

tax rate 40%

20,000 common stocks outstanding at $23.08

they want to change from 100% equity to 45% debt and 55% equity

WACC = 10.4%

new value of operations $576,923

PP's value of operations = {$100,000 x (1 - 40%)} / WACC = $576,923

the new stock price should = $576,923 / 20,000 stocks = $28.84615

Stock price will be $28.846

approximately $259,615 / $28.846 = 8,999 stocks should be repurchased

number of stocks remaining after the repurchase = 20,000 - 8,999 = 11,001

total capitalization = $317,308 / 11,001 stocks = $28.84 ≈ $28.85 per stock

You might be interested in
True Moto Corp. (TMC) is a leading automobile company. The company has been able to sustain its competitive advantage primarily
guapka [62]

Answer:

The correct answer is the option D: High costs involved in imitation.

Explanation:

To begin with, the name of ''VRIO'' refers to an analysis that is used in the field of business in order to obtain better results in the strategy of the firm's management process, focusing in a resource or capability that the company possesses in order to determine its competitive potential.

To continue, the questions about imitability in the analysis are the ones that focuses in the costs that the other companies will have to generate a resource or capability and if they have or not a disadvantage due to that. To sum up, in the case presented, the TMC's competitors face a disadvantage regarding the costs of imitation due to the social complexity, patents, unique historial conditions and casual ambiguity. Therefore that TMC is able to mantain its competitive advantage.

6 0
3 years ago
Explain the role of accounting in providing information for monitoring progress and decision-making.
BlackZzzverrR [31]
<span>The national professional organization of practicing Certified Public Accountants (CPAs), whose various committees and boards have been an important contributor to the development of GAAP.</span>
5 0
3 years ago
Introduction: Drag each tile into the box where it best belongs. Causes of Recession. Cause of Recovery. loss of jobs for worker
Dennis_Churaev [7]

Answer: Please refer to Explanation

Explanation:

First an explanation of the terms.

Recession - A Recession refers to successive Quarters seeing a reduction in economic activity or negative Economic growth. On the business cycle, it is the area between the Peak and the Trough.

Recovery - This is the period in the business cycle where the Economy is rising and Economic growth is starting to be positive. It shows Increased business activity and is the area between the Trough and the Peak after the cycle leaves the Trough.

Classification.

Loss of jobs for workers - CAUSES OF RECESSION.

When workers lose their jobs, that means they will have less money to buy goods and services meaning that demand will fall. Demand falling means that companies have to produce less which leads to a reduction in Economic activity.

Falling demand for products - CAUSES OF RECESSION

As just mentioned, when there is a falling Demand for products, suppliers will respond by producing less goods. When this happens, there will be a reduction in Economic activities which is a Recession if the trend continues for a period of time.

Increased hiring by employers - CAUSE OF RECOVERY.

As more employers hire more people it signifies 2 things. One is that the company is now producing more which leads to more economic activity. Two is that with more people employed, more people have money and as such can buy more goods and services which means increased demand. This will help the Economy recover.

Rising demand for products - CAUSE OF RECOVERY.

As the demand for products rises, suppliers will respond by ramping up production. To do this they will need to employ more people and in so doing empower more people with money to buy goods and services which will increase Economic Activity which will help the economy recover.

6 0
3 years ago
When determining the account balance for a particular account (ex. Accounts Receivable) in order to prepare a trial balance, the
DanielleElmas [232]

Answer: General ledger

Explanation:

According to the given question, the company's general ledger is the term that is used to refers to the account that helps in balancing the specific account in the form of record, store and also summarizing all the transaction details of an organization by using the proper balance sheet chart.

The main role of the general ledger is that it helps in preparing the financial reports by including all the data such as revenue, liability, expense and the asset.

The general ledger is preparing the balance by using the transaction statement of the company's account.

 Therefore, General ledger is the correct answer.

4 0
3 years ago
Bradford Maintenance, a firm which provides lawn care services, has some seasonal variations in its cash flow needs, since much
Whitepunk [10]

Answer: B) Conservative Financial Policy

Explanation:

A Conservative Financial policy refers to a situation where an entity usually finances their permanent working capital with long term debt in part or in it's entirety.

It is stated that Bradford Maintainance uses long-term sources of funds to finance its assets which would point to a Conservative Financial Policy.

5 0
3 years ago
Other questions:
  •  A sick relative has decided to create a living will. Based on your knowledge of living wills, what type of information do you t
    11·1 answer
  • explain how mtumi can apply concentric, horizontal and conglomerate diversification. give examples to support your answer
    10·1 answer
  • What price must a company typically pay to buy another company? The price will: 1. include some premium over the current market
    13·1 answer
  • Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to
    14·1 answer
  • Moon, a farmer, needs to install a two-thousand-pound piece of equipment in his barn. This will require lifting the equipment th
    5·1 answer
  • Phil deposits his money in the bank and earns _____. The bank uses part of Phil's money to make _____.
    8·2 answers
  • Review the WBS and Gantt chart you created for Tasks 3 and 4 in Module 5. Propose three to five additional activities that would
    11·1 answer
  • Doris lewis owns lewis edibles, inc., a company that makes tongue tinglin' bbq sauce. she wants to target local people who like
    6·1 answer
  • Managers make assumptions in CVP analysis. These assumptions include:__________
    15·1 answer
  • Are good places to look to find your current expenses when building your budget.
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!