Problem 1. Sunrise Industries Corp, is planning to repurchase part of its common stock in the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Problem 1. Sunrise Industries Corp, is planning to repurchase part of its common stock in the open market by issuing corporate debt. As a result, the debt-to-equity ratio is expected to rise from 40 percent to 50 percent. The annual interest payment on its outstanding debt amounts to $0.75 million with an interest rate at 10 percent. The expected earnings before interest are $3.75 million. There are no taxes in the country where Sunrise operates. (Treat the debt and earnings as perpetuities to simplify calculation.) a. What is the total value of Sunrise Industries Corp? b. What is the expected return on equity before and after the announcement of the stock? c. How would the stock price change at the announcement of the repurchase? Problem 1. Sunrise Industries Corp, is planning to repurchase part of its common stock in the open market by issuing corporate debt. As a result, the debt-to-equity ratio is expected to rise from 40 percent to 50 percent. The annual interest payment on its outstanding debt amounts to $0.75 million with an interest rate at 10 percent. The expected earnings before interest are $3.75 million. There are no taxes in the country where Sunrise operates. (Treat the debt and earnings as perpetuities to simplify calculation.) a. What is the total value of Sunrise Industries Corp? b. What is the expected return on equity before and after the announcement of the stock? c. How would the stock price change at the announcement of the repurchase?
Expert Answer:
Answer rating: 100% (QA)
a What is the total value of Sunrise Industries Corp ANS WER 15 million WORK ING E BIT 3 75 million ... View the full answer
Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Posted Date:
Students also viewed these finance questions
-
Arya Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firms debt-equity ratio is expected to rise from 20 percent to 35 percent. The firm...
-
Locomotive Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firms debtequity ratio is expected to rise from 35 percent to 50 percent. The...
-
Garnett Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firms debt-to-equity ratio is expected to rise from 30 percent to 45 percent. The...
-
For selection of controls for the case-control analysis, investigators decided to use a matching process. Which variables did they choose to match on when selecting controls? For selection of...
-
On December 31, the adjusted trial balance of Cisneros Employment Agency shows the following selected data. Accounts Receivable ........$24,500 Interest Expense ........... 8,300 Service Revenue...
-
For the op amp circuit in Fig. 7.134, find v0 (t) for t > 0. 25 mF 100 k
-
When to use a settlement brochure?
-
Transactions related to revenue and cash receipts completed by Sycamore Inc. during the month of March 20Y8 are as follows: Mar. 2. Issued Invoice No. 512 to Santorini Co., $905. 4. Received cash...
-
Was deregulation a boom or doom for the U.S. airline industry (or later in Europe)? Why do you think so? What do you predict for the future of global air transportation?
-
A storeroom is used to organize items stored in it on N shelves. Shelves are numbered from 0 to N-1. The K-th shelf is dedicated to items of only one type, denoted by a positive integer A[K]....
-
9. Find the missing angle measurements: ZQ- ZNOP - M 67 94" 19 ZP- ZMOQ - 47 20 N 39 P
-
Find the state-space form directly from the I/O equation. \(y^{(4)}+\ddot{y}+\frac{1}{4} \dot{y}+y=4 u\)
-
Find the state-space form directly from the I/O equation. \(2 y^{(4)}+\ddot{y}+2 \dot{y}+y=\dddot{u}+2 \ddot{u}+u\)
-
Find the state-space form directly from the I/O equation. \(\frac{2}{3} \ddot{y}+\dot{y}+\frac{3}{2} y=\frac{1}{3} \ddot{u}+\dot{u}+u\)
-
Find the state-space form directly from the I/O equation. \(\frac{1}{2} \ddot{y}+\dot{y}+y=\dot{u}\)
-
The matrices in the state-space form of a system model are given. a. Find the transfer function (or transfer matrix) by using Equation 4.21. b. Verify the result of (a) by using the ss2tf command....
-
What are the four concepts that underlie environmental economics and the three generally-agreed upon concepts that underlie ecological economics?
-
Uniform electric field in Figure a uniform electric field is directed out of the page within a circular region of radius R = 3.00 cm. The magnitude of the electric field is given by E = (4.50 x 10-3...
-
A firm is considering an investment in a new machine with a price of $9.26 million to replace its existing machine. The current machine has a book value of $2.48 million, and a market value of $4.16...
-
An investor is said to take a position in a collar if she buys the asset, buys an out-of-the-money put option on the asset, and sells an out-of-the-money call option on the asset. The two options...
-
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 9 years because the firm needs to plow back its earnings to fuel growth. The company will...
-
Air is drawn from the atmosphere into a turbomachine. At the exit, conditions are \(500 \mathrm{kPa}\) gage and \(130^{\circ} \mathrm{C}\). The exit speed is \(100 \mathrm{~m} / \mathrm{s}\) and the...
-
At high speeds the compressor and turbine of the jet engine may be eliminated entirely. The result is called a ramjet (a subsonic configuration is shown). Here the incoming air is slowed and the...
-
A turbine is supplied with \(0.6 \mathrm{~m}^{3} / \mathrm{s}\) of water from a \(0.3 \mathrm{~m}\) diameter pipe; the discharge pipe has a \(0.4 \mathrm{~m}\) diameter. Determine the pressure drop...
Study smarter with the SolutionInn App