Omnicorp is all equity financed and generates perpetual annual EBIT of $500. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year
Omnicorp has 1,000 shares outstanding which trade for $3.125. The stockholders of Omnicorp require a return of 8%. Omnicorp is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 2%. Assume that the tax rate is 50%. What price does Omnicorp have to offer for repurchased shares such that the repurchase price is equal to the price that prevails after the repurchase is complete?
A) $3.125
B) $3.472
C) $3.906
D) $4.34
E) $4.13
B
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If the exchange rate equals the ratio of price indexes in two countries, there is said to be
A. one price fits all. B. absolute purchasing-power parity. C. relative purchasing-power parity. D. interest-rate parity.
Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:
A. Debit Cash $200 and credit Cash Over and Short $200. B. Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25. C. Debit Cash $200 and credit Petty Cash Over and Short $200. D. Debit Petty Cash $200 and credit Cash $200. E. Debit Cash $200 and credit Petty Cash $200.
Other things being equal, the longer a company's operating cycle, the higher the company's operating costs are likely to be.
Answer the following statement true (T) or false (F)
We can find only the inverse of square matrices
Indicate whether the statement is true or false