Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets. A) Nielson's EPS if they choose not to change their capital structure is closest to: B) If Nielson repurchases shares at the current market price, how many shares will be repurchased? A) B) A. $2.90 B. $2.50 C. $2.30 D. $2.00 A. 0.4 Million B. 2.5 Million C. 4 Million D. 25 Million Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $50 million at an interest rate of 8% and using the proceeds to repurchase shares. Assume perfect capital markets. A) Nielson's EPS if they choose not to change their capital structure is closest to: B) If Nielson repurchases shares at the current market price, how many shares will be repurchased? A) B) A. $2.90 B. $2.50 C. $2.30 D. $2.00 A. 0.4 Million B. 2.5 Million C. 4 Million D. 25 Million
Expert Answer:
Answer rating: 100% (QA)
Answer Market price of stock 20 per share Number of outstanding stock 8 million De... View the full answer
Related Book For
Fundamentals of Physics
ISBN: 978-0471758013
8th Extended edition
Authors: Jearl Walker, Halliday Resnick
Posted Date:
Students also viewed these finance questions
-
Three blocks with masses m1 = 5.00 kg, m2 = 10.0 kg, and m3 = 15.0 kg are connected by massless strings which run over two frictionless pulleys. Block 1 sits on a highly polished plane inclined at an...
-
0.11 0.93 Servers RHO Probability of 0 1 2 3 4 5 In the system 0.04 N (s) N (U) T (s) T(U) 1 0.60 0.40 0.24 0.14 0.09 0.05 0.03 CUSTOMERS 1.50 0.90 TIME (Minutes) 10.000 6.000 2 0.30 0.49 0.33 0.11...
-
Australia Dear Home Builders (ADHB) is a private residential builder company constructing hundreds of residential homes every year in Australia. Currently all project management related activities...
-
Suppose that a 20-year bond pays $4 coupon once a year, and its yield rate is 6%. The bond has write-down of $0.49 for the first year. Calculate the write-down amount for the third year. Round the...
-
A shipment of 10 television sets includes three that are defective. In how many ways can a hotel purchase four of these sets and receive at least two of the defective sets?
-
(a) Use a graph of to estimate the value of lim x →0 f(x) to two decimal places. (b) Use a table of values of f(x)to estimate the limit to four decimal places. (c) Use the Limit Laws to find the...
-
Explain the difficulty in determining the discount rate using the weighted average cost of capital (WACC) for entrepreneurial firms. What key components of WACC are used to evaluate the discount rate?
-
Hart Lumber is considering the purchase of a paper company. Purchasing the company would require an initial investment of $300 million. Hart estimates that the paper company would provide net cash...
-
The following pension-related data pertain to Metro Recreation's noncontributory, defined benefit pension plan for 2024: ($ in thousands) January 1 December 31 Projected benefit obligation...
-
An object of mass m1 on a frictionless horizontal table is connected to an object of mass m2 through a very light pulley P1 and a light fixed pulley P2 as shown in Figure P5.34. (a) If a1 and a2 are...
-
You are comparing two investment options. The cost to invest in either option is the same today. Both options will provide you with $20,000 of income. Option A pays five annual payments starting with...
-
On December 15, Judy wrote a letter to David stating that she would sell to David all of the mine-run coal that David might need to buy during the next calendar year for use at Davids factory,...
-
Henry Hughes, who operates a department store, executed the following instrument: $2,600 Chicago, March 5, 2016 On July 1, 2016, I promise to pay Daniel Dalziel, or order, the sum of Twenty-Six...
-
Chevron Phillips (CP) has put into place new laboratory equipment for the production of chemicals; the cost is \($1,800,000\) installed. CP borrows 45 percent of all capital needed, and the borrowing...
-
Roy Rand executed and delivered the following note to Sue Sims: Chicago, Illinois, June 1, 2016; I promise to pay to Sue Sims or bearer, on or before July 1, 2016, the sum of \($7,000.\) This note is...
-
State whether the following provisions in a note impair or preclude negotiability, the instrument in each instance being otherwise in proper form. Answer each statement with either Negotiable or...
-
In the beginning of Case B, it is revealed that ACOS determined they would take a price increase that would guarantee a 10% margin. Upon investigation of current pricing and margin in the cost data...
-
Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Clevelands outstanding stock. No excess amortization resulted from these...
-
Three vectors ate given by a = 3.0i + 3.0j 2.0k, b = 1.0i 4.0j + 2.0k, and c = 2.0i + 2.0j + 1.0k. Find (a) a .(b x c), (b) a . (b + c), and (c) a x (b + c).
-
Suppose the 1 kg standard body accelerates at 4.00m/s2 at 160o from the positive direction of an x axis due to two forces; one is F1 = (2.50N)i + (4.60N)j What is the other force (a) In unit-vector...
-
Two atmospheric sound sources A and B emit isotropically at constant power. The sound levels F of their emissions are plotted in Figure versus the radial distance r from the sources. The vertical...
-
Does the direction of the electric field along the axis inside an electric dipole coincide with the direction of the electric dipole moment?
-
Suppose a negatively charged ring is placed directly above the positively charged ring in Figure 28.7. If both rings spin in the same direction, is the magnetic interaction between them attractive or...
-
Suppose the square current loop in Figure 28.10 is replaced by a circular loop with a diameter equal to the width of the square loop and with the same current. Does the circular loop experience a...
Study smarter with the SolutionInn App