After a successful college football career, Tim Turbo partnered with Danny Waffle (naming themselves TD Industries)...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
After a successful college football career, Tim Turbo partnered with Danny Waffle (naming themselves TD Industries) to manufacture and distribute fruit pies. On 1/1/2022, the company had one product that generated EBIT of $200,000 on 12/31 of each year (forever), with an asset beta of 1.25. The firm faced a tax rate of 40 percent, and the firm had no debt outstanding. At that time, the risk-free rate, RF, was 3 percent and the MRP was 5 percent. The firm had 100,000 shares outstanding, and all earnings were (and will always be) paid out as dividends. As you can calculate, the firm had a price / share of $12.97. On 1/2/2022 at 8:00 a.m., TD announced a new pie product: • The project required that the company spend $750,000 to purchase The Buckeye Grinder 2500, a buckeye mashing machine. For tax purposes, the machine will not be depreciated since it will last forever. No working capital is required. • To fund the project, $X will be raised as perpetual debt, with an annual coupon rate equal to the . risk-free rate, and interest paid annually. The balance of the funds needed will be raised as new equity. • The project increased the company's EBIT by $466,666.66 a year forever (starting on 12/31/2022). . The project had an asset beta of 1.7. As you can calculate, when the market opened at 9:30 a.m., the price / share fully adjusted to the announcement, selling for $31.4208. The company then issued the new shares and debt, and implemented the project. How many shares are outstanding after the entire transaction is complete? Enter your answer as an integer, with no punctuation. For example, if your answer is 105,201.33, enter "105201". Canvas may insert a comma, showing "105,201". After a successful college football career, Tim Turbo partnered with Danny Waffle (naming themselves TD Industries) to manufacture and distribute fruit pies. On 1/1/2022, the company had one product that generated EBIT of $200,000 on 12/31 of each year (forever), with an asset beta of 1.25. The firm faced a tax rate of 40 percent, and the firm had no debt outstanding. At that time, the risk-free rate, RF, was 3 percent and the MRP was 5 percent. The firm had 100,000 shares outstanding, and all earnings were (and will always be) paid out as dividends. As you can calculate, the firm had a price / share of $12.97. On 1/2/2022 at 8:00 a.m., TD announced a new pie product: • The project required that the company spend $750,000 to purchase The Buckeye Grinder 2500, a buckeye mashing machine. For tax purposes, the machine will not be depreciated since it will last forever. No working capital is required. • To fund the project, $X will be raised as perpetual debt, with an annual coupon rate equal to the . risk-free rate, and interest paid annually. The balance of the funds needed will be raised as new equity. • The project increased the company's EBIT by $466,666.66 a year forever (starting on 12/31/2022). . The project had an asset beta of 1.7. As you can calculate, when the market opened at 9:30 a.m., the price / share fully adjusted to the announcement, selling for $31.4208. The company then issued the new shares and debt, and implemented the project. How many shares are outstanding after the entire transaction is complete? Enter your answer as an integer, with no punctuation. For example, if your answer is 105,201.33, enter "105201". Canvas may insert a comma, showing "105,201".
Expert Answer:
Answer rating: 100% (QA)
Given that Tax rate t 40 EBIT 200000 Unlevered Beta B Since ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Assume that Reynolds tax rate is 40 percent and the equipments depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of...
-
KRZ Companys tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not...
-
KRZ Companys tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not...
-
When Ralph Lauren makes shirts to a customers exact preferences, what utility is provided?
-
If a firm announces a dividend decrease, would you expect the stock price to go down more or less than the present value of that decrease? Why?
-
The company is a golf course developer that constructs approximately 10 courses per year. Next year the company will buy 10,000 trees to install in the courses it builds. In recent years, the price...
-
On April 23, 2014, Calvin Loyer admitted his wife, Edeltrud Loyer, to a nursing home administered by Signature Healthcare. During the admissions process, Calvin signed an arbitration agreement...
-
Accounting Change Ramirez Co. decides at the beginning of 2010 to adopt the FIFO method of inventory valuation. Ramirez had used the LIFO method for financial reporting since its inception on January...
-
1/ You have two different assets (investments). Asset A (perpetuity) will pay you $1,000 in one year, $1,000 in two years, $1,000 in three years, and so on every year forever. Asset B will pay you...
-
Lox, Stock and Bagel Company (LSB) is determining its cost of capital. It uses a risk free, medium term bank loan and equity financing. Part a: The current balance on the bank loan is $8,000,000. It...
-
You are a member of Will Smith's communication team. SCENARIO: At the 2022 Oscars, Will Smith stayed seated and DID NOT go up unto the stage, approach Chris Rock, slap him, walk back off the stage to...
-
Assume for Questions 5 through 9 that the state of Exuberance issued $10,000,000 of 5%, 20-year refunding bonds in 20X5 at par. If the state placed $12,000,000 (the $10,000,000 from the advance...
-
Which of the following pronouncements provides the most authoritative guidance applicable to financial reporting for state and local governments? a. FASB Accounting Standards Codification. b....
-
Organizations that are considered to be nonprofit include such organizations as a. churches. b. the Boy Scouts and Girl Scouts. c. church-supported hospitals. d. state CPA societies. e. all of the...
-
One unique characteristic of most government and nonprofit organizations is that a. a primary source of financing is sales of services and goods to customers. b. their constituency automatically...
-
What measurement focus and basis of accounting is used to prepare government-wide financial statements?
-
Heavy football players: Following are the weights, in pounds, for offensive and defensive linemen on a professional football team at the beginning of a recent year. Part: 0 / 3 Part 1 of 3 Offense:...
-
Using the theoretical sampling strategy, how many samples of size 4 (n = 4) can be drawn from a population of size: (a) N = 5? (b) N = 8? (c) N = 16? (d) N = 50?
-
Katie Alvarez has recently been hired as controller of Empco Inc., a sheet-metal manufacturer. Empco has been in the sheet-metal business for many years and is currently investigating ways to...
-
Alpha Group, a division of Dame Company, manufactures a variety of both high- and low-volume products. The following information is for Alpha Group's most recent year of operation: Alpha Group's...
-
Peneli Cologne Company produces cologne in a two-step process. A base fragrance is created by mixing several chemicals in the Blending Department. The liquid output of the Blending Department is...
-
Explain the effect of each of these on the shape and position of the countrys production-possibility curve: a. A proportionate increase in the total supplies (endowments) of all factors of...
-
Why does the HeckscherOhlin theory predict that most research and development (R&D) activity is done in the industrialized countries?
-
A free-trade equilibrium exists in which the United States exports machinery and imports clothing from the rest of the world. The goods are produced with two factors: capital and labor. The trade...
Study smarter with the SolutionInn App