Need help with a Question on Finance

Dec 4th, 2015
Business Finance
Price: $15 USD

Question description

Elliott Enterprises (EE) is an all-equity firm, which pays out 100% of earnings to its shareholders. As an established firm, its earnings and obligations are considered perpetual. In the upcoming calendar year, EBIT is projected to be $7,000,000. Tax rate is 32%.

A). If the cost of equity capital is 9% and there are 500,000 shareholders calculate the price per share of EE stock.

B). 20,000 bonds with 6% coupon will be sold to raise funds to repurchase equity. What will be the new value of EE?

C).Recalculate the cost of equity capital of EE.

Tutor Answer

(Top Tutor) Fatin M7
School: Purdue University

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