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NEW QUESTION: 1
Buchanan Brothers anticipates that its net income at the end of the year will be $3.6 million (before any recapitalization). The company currently has 900,000 shares of common stock outstanding and has no debt. The company's stock trades at $40 a share. The company is considering a recapitalization where it will issue $10 million worth of debt at a yield to maturity of 10 percent, and use the proceeds to repurchase common stock. Assume the stock price remains unchanged by the transaction, and the company's tax rate is 34 percent. What will be the company's earnings per share if it proceeds with the recapitalization?
A. $4.52
B. $2.23
C. $2.45
D. $5.54
E. $3.26
Answer: A
Explanation:
Explanation/Reference:
Explanation:
After issuing the debt, the company can repurchase $10,000,000/$40 = 250,000 shares leaving 650,000 shares outstanding. We still need to find the expected NI after issuing the debt. We're given the anticipated NI is $3.6 million. Thus, the EBIT (before the debt issue) can be found as follows: $3,600,000 = EBIT(1 -
0.34) or EBIT = $5,454,545.45. The company will pay $1,000,000 in interest after issuing the debt so the new EBT will be $5,454,545.45 - $1,000,000 = $4,454,545.45. Also, the new NI figure will be:
$4,454,545.45(1 - 0.34) = $2,940,000. Finally, $2,940,000/650,000 = $4.52 is the EPS after the recapitalization.
NEW QUESTION: 2
DRAG DROP
A company has computers that run Windows 7 Enterprise.
A 500-GB hard disk has a single volume and 450-GB of free space. You attempt to reduce the size of the volume but the operation fails due to physical disk errors on the hard disk.
Which two actions should you perform in sequence? (To answer, move the appropriate actions from the list of actions to the answer area and arrange them in the correct order.)
You need to ensure the computer has a hard disk without physical disk errors and containing all existing data.
Answer:
Explanation:
Explanation:
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NEW QUESTION: 3
You plan to offer seasonal articles for sale in the stores on a specific date. You order the articles from an external vendor. The vendor delivers to the appropriate distribution center, from where the goods are distributed to the respective stores.
In which sequence do you carry out the process steps?
A. Define assortments - Create purchasing list - Generate order list items - Generate purchase order - Generate allocation table.
B. Define assortments - Create purchasing list - Generate order list items - Generate allocation table - Generate purchase order
C. Generate allocation table - Generate purchase order - Define assortments - Create purchasing list - Generate order list items
D. Define assortments - Generate allocation table - Generate purchase order - Create purchasing list - Generate order list items
Answer: A
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