Problem $16-24$ Stock Value and Leverage

Warsaw Manufacturing, Incorporated, plans to announce that it will

perpetual debt and use the proceeds to repurchase common stoc

at par with a coupon rate of $6$ percent. The company is currentls

$$6\mathrm{.}86$ million with $222,000$ shares of common stock outstanding.

bonds, the company will maintain the new capital structure inc

pretax earnings of $$1\mathrm{.}63$ million are expected to remain constant

rate is $24$ percent.

a$.$ What is the expected return on the company's equity before

the debt issue? $($Do not round intermediate calculations and

a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ What is the price per share of the company's equity? $($Do no

calculations and round your answer to $2$ decimal places, e$.$g$.$

d$.$ What is the company's stock price per share immediately

announcement? $($Do not round intermediate calculations an

to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

e$-1.$ How many shares will the company repurchase as a result $o$

not round intermediate calculations and round your answer

e$.$g$.,32\mathrm{.}16.)$

e$-2.$ How many shares of common stock will remain after the repur

intermediate calculations and round your answer to $2$ decimi

g$.$ What is the required return on the company's equity after the

round intermediate calculations and enter your answer as a $$

decimal places, e$.$g$.,32\mathrm{.}16.)$