What is the purpose of a thesis?

The A. J. Croft Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coup

o-na [289]

Answer:

current market value = $800000, WACC = 7.5%
new WACC = 7.38%, Total value of firm = $ 813,008.13
stock price per share = $62.00
4750 shares

Explanation:

1) Calculate AJC's current total market value and weighted average cost of capital

current market value = value of equity + value of debt

= ( 10000 * $60 ) + $200000

= $800000

Weighted average cost of capital = ( weight of equity * cost of equity ) + ( weight of debt * cost of debt * ( 1 - tax rate )

= (75% * 8.8% ) + (25% * 6% * 0.6 ) = 7.5%

2) what would be AJC's new WACC and total value

WACC = ( weight of equity * cost of equity ) + ( weight of debt * cost of debt * ( 1 - tax rate )

= ( 60% * 9.5% ) + ( 40% * 7% * 0.6 ) = 7.38%

Total value of the firm =

= ( Cash flow after tax / WACC )

= (( 100000 * ( 1-40%)) / 7.38%

= 100000 * 0.6 / 7.38% = $ 813,008.13

3) Calculate the new stock price per share

new stock price = ( value of equity + change in debt ) / original number of outstanding shares

value of equity = weight of equity * firm value

change in debt =( weight of debt * firm value ) - initial debt value

Hence new stock price =

( 50% *$820000) + (( 50% * $820000)- $200000)) / 10000

= $62.00

4) calculate how many shares AJC would repurchase in the recapitalization

= original shares - Remaining shares

= 10000 - 5250 = 4750 shares

while ;

Remaining shares = value of equity / stock price = $336000 / $64 = 5250

original shares = 10000

3 0

3 years ago

g FisherCo is intending to invest in a new project. The ________ is the minimum rate of return the firm will accept on this proj

IrinaK [193]

FisherCo is intending to invest in a new project. The hurdle rate is the minimum rate of return the firm will accept on this project.

The hurdle rate is the minimum rate of return a project must have in order for a project to be accepted. It can also be referred to as the discount rate or the required rate of return or the cost of capital.

When the hurdle rate is greater than the internal rate of return of a project, the project would be rejected. If the hurdle rate is less than the internal rate of return of a project, the project would be accepted.

To learn more, please check: brainly.com/question/17439820

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2 years ago

The selling price of houses would be most likely to decrease if there were first a decrease in which of the following? A. New-ho

Maurinko [17]

Answer: I would have to guess option c the unemployment rate.

Explanation:

4 0

3 years ago

Read 2 more answers

An export subsidy will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall d

Paladinen [302]

Answer:

increase; decrease; decrease; decrease.

Explanation:

Trade can be defined as a process which typically involves the buying and selling of goods and services between a producer and the customers (consumers) at a specific period of time.

Basically, trade can be categorized into two (2) main groups and these are;

I. Import: this involves bringing in goods from a foreign country to sell in a different (domestic) country.

II. Export: it involves the sales of goods produced in a domestic country to a foreign country.

An export subsidy can be defined as any government policy that encourages the export of goods to other countries while discouraging the sales of goods in the domestic market through the use of tax reliefs, low cost loans, government foreign adverts, etc.

A surplus is the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.

Producer surplus is the amount a buyer is willing to pay for a good minus the cost of producing the good.

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Hence, an export subsidy will increase producer surplus, decrease consumer surplus, decrease government revenue, and decrease overall domestic national welfare.

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2 years ago

Regarding the effects of coaching on standardized test scores, which of the following statements is most representative of curre

Alenkasestr [34]

The correct answer is choice a, coaching can lead to 100-point gains if the quality of coaching is high.

Current research has been published by the College Board indicating that students using a high quality coaching program can increase their standardized test scores by over 100 points.

8 0

3 years ago