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shepuryov [24]
3 years ago
12

NewKirk Inc.., is an unlevered firm with expected annual earnings before taxes of $21 million in perpetuity. The current require

d return on the firm's equity is 16 percent, and the firm distributes all of its earnings as dividends at the end of each year. The company has 1.3 million shares of common stock outstanding and is subject to a corporate tax rate of 35 percent. The firm is planning a recapitalization under which it will issue $30 million of perpetual 9 percent debt and use the proceeds to buy back shares. What is cash flows available to equity holders after recapitalization?
Business
1 answer:
IrinaVladis [17]3 years ago
8 0

Answer:

$11,895,000

Explanation:

Expected annual earnings before tax = $21,000,000

Debt issue = $30,000,000

Interest rate = 9%

Annual Interest expenses = $30,000,000 × 9%

= $2,700,000

EBT = EBIT - Interest expenses

= $21,000,000 - $2,700,000

= $18,300,000

Net income = $18,300,000 × (1 - 35%)

= $11,895,000

Cash flows available to equity holders after recapitalization will be $11,895,000.

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b. Again

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2 years ago
If a customer buys $10,000 worth of stock in a cash account, then sells the shares for $12,000 without first paying for the buy
katovenus [111]

Answer:

B) II and III.

Explanation:

Based on the information given the statement that are TRUE are II and III

II. The amount of $2,000($10,000-$12,000) which is the profit for the business will be given to the customer but the customer account will have to be frozen or put on hold for 90 days because the customer had not paid for the buy side before selling the shares for the amount of $12,000

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3 years ago
Select the items below that describe specific kinds of producers
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2 everything is technically about technology
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3 years ago
The general relationship between spot and forward exchange rates is specified by a concept called interest rate parity. It speci
elena-s [515]

Answer: -2.55%

Explanation:

The formula to calculate Forward Rate is:

Forward Rate = Spot rate X \frac{1 + I_{O} }{1 + I_{D} }

where I_{O} is the Interest rate of the overseas country and

I_{D} is the Interest rate of the domestic country

$0.0052 = 0.005 X  \frac{1 + 0.0135 }{1 + I_{D} }

$0.0052 X {1 + I_{D} } =  0.005 X  1.0135

$0.0052 X {1 + I_{D} } =  0.0050675

{1 + I_{D} } =  \frac{0.0050675}{0.0052}

{1 + I_{D} } =  0.9745 - 1

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The yield on 180-day risk-free securities in the United States is -2.55%

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