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
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.

You might be interested in
Gold Peak is a brand of iced tea introduced by Coca-Cola North American and intended to taste like the tea ""Mom used to brew.""
Lostsunrise [7]

Answer:

The correct answer is introductory.

Explanation:

In short, it is the stage where the conception, definition and experimental period of the product is fixed, studies say that more than 70% fail to launch to the market. It is characterized by:

  1. Low sales volume
  2. Great technical, commercial and communication investment.
  3. Great effort to fine-tune the manufacturing means.
  4. Difficulties to introduce the product in the market.
  5. Low saturation of your potential market.
  6. Few bidders.
  7. Special dedication of the sales team.

In summary, this phase is characterized by a negative profitability due to the great resources that are necessary to manufacture, launch and refine the product, compared to the sales volume achieved.

7 0
3 years ago
An 85-year old risk averse investor is not happy about the minimal return she is earning on her current investments. She is stre
Ilia_Sergeevich [38]

Answer:

B. Reduce the Money Market Fund allocation by 30% (to 10%) and put the released funds in AAA-rated corporate bonds

Explanation:

First of all, since the investor is risk averse and cannot afford to lose money on any risky investment, she should change the mix of her investment portfolio but without increasing risks. Corporate bonds that are AAA-rated carry a very low risk and pay a little higher than money market funds. So a small decrease in money market fund assets and an increase in AAA-rated bonds should yield a slightly higher return.

Investing in equities would be too risky and US Treasuries pay even less interests than money market funds.

6 0
3 years ago
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking u
jenyasd209 [6]

Answer

The answer and procedures of the exercise are attached in the following archives.

Step-by-step explanation:

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

5 0
3 years ago
In the beginning, a low base salary for the owner, with a bonus at the break-even point is?
frez [133]

Answer:

The best solution

Explanation:

I took the test and got it right

7 0
3 years ago
Compensation in the United States is governed by a number of laws that set boundaries for what companies can do. The rules gover
lesya [120]

Answer:

<h3>I don't know otherwise please marks me as brainliests..</h3>
7 0
3 years ago
Other questions:
  • Exercise 24-3 Payback period computation; straight-line depreciation LO P1 A machine can be purchased for $140,000 and used for
    10·1 answer
  • The market analyst of a chain megastore bakery, called More Dough, asks you to find out why people are choosing to go to smaller
    14·1 answer
  • Which of the following correctly indicates the order of phases in product planning?
    11·1 answer
  • Use closed ads in a sentence
    6·1 answer
  • Jipsom and Klark were partners with capital account balances of $80,000 and $100,000, respectively. Looney directly paid $32,000
    15·1 answer
  • On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $27,000 and giving a short-term note for
    6·1 answer
  • Larkspur, Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sol
    11·1 answer
  • The Evanec Company's next expected dividend, D1, is $3.03; its growth rate is 5%; and its common stock now sells for $34.00. New
    9·1 answer
  • Max Company allocates overhead based on direct labor hours. It allocates overhead costs of $13,800 to two different jobs as foll
    5·1 answer
  • Exquisite Prints is an up-and-coming photography company. To date, producing good photography is the priority of the company - n
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!