River Cruises is all-equity-financed. Number of shares Price per share Market value of shares Profits before interest Number of shares Price per share Market value of shares Market value of debt Profits before interest Interest Equity earnings Earnings per share Return on shares $ Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. Note: Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places. $ Outcomes Current Data 100,000 $ 10 $ 1,000,000 Data Slump 10 Outcomes Slump $ 80,500 80,500 State of the Economy Normal Boom $ 136,000 $ 197,500 State of the Economy Normal % $ 136,000 % Expected Outcome $ Boom 197,500 %

River Cruises is all-equity-financed. Number of shares Price per share Market value of shares Profits before interest Number of shares Price per share Market value of shares Market value of debt Profits before interest Interest Equity earnings Earnings per share Return on shares $ Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. Note: Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places. $ Outcomes Current Data 100,000 $ 10 $ 1,000,000 Data Slump 10 Outcomes Slump $ 80,500 80,500 State of the Economy Normal Boom $ 136,000 $ 197,500 State of the Economy Normal % $ 136,000 % Expected Outcome $ Boom 197,500 %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market value of shares $ 1,000,000 State of the Economy Slump Normal Boom Profits before interest $ 73,750 122,500 184,000 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Outcomes Number of Shares ? Price per share $10 market value of shares ? market value of debt ? State of the Economy slump Normal Boom…
River Cruises is all-equity-financed. Current Data Number of shares 100,000 $ $1,000,000 Outcomes Price per share Market value of shares 10 State of the Economy Slump Normal Вoom Profits before interest $ 82,750 $ 140,500 $ 202,000 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Data Number of shares Price per share Market value of shares Market value of debt 10 Outcomes State of the Economy Slump Normal Вoom Profits before interest $ 82,750 140,500 202,000 Interest Equity earnings Earnings per share Return on shares % % Expected Outcome
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market value of shares $ 1,000,000 Outcomes State of the Economy Slump Normal Boom Profits before interest $ 83,500 $ 142,000 $ 203,500 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Data Number of shares 100,000 Price per share $10 Market value of shares $10 Market value of debt $1,000,000 Outcomes State of the Economy Slump Normal Boom…
River Cruises is all-equity-financed. Current Data Number of shares 100,000 Price per share $ 10 Market value of shares $ 1,000,000 Outcomes State of the Economy Slump Normal Boom Profits before interest $ 82,000 $ 139,000 $ 200,500 Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to 2 decimal places.) Data Number of Shares ________? Price per share $10 Market value of shares ________? Market value of debt __________? Outcomes State of the…
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