Need help with a Question on Finance

Dec 4th, 2015
Anonymous
Category:
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.


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(Top Tutor) Fatin M7
School: Purdue University

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