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Issuing Equity

Lange Inc.

Lange Ince. hired your consulting firm to help them estimate the cost of equity. The yield on Lange's bonds is 7.25%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.5% over a firm's own cost of debt. What is an estimate of Lange's cost of eqity from retained earnings?

Cost of Equity: Academic Approach

Scenario: A privately held corporation wishes to estimate its cost of equity. The firm has a target debt-to-equity ratio of 0.5 and the marginal tax rate is 35%. The yield on 10 year U.S. Treasury securities is 4% and the expected market risk premium is 6%. It has identified 3 pure play firms with the following equity betas and

Fund Expansion Through Equity

You own your own firm, and you want to raise $30 million to fund an expansion. Currently, you own 100% of the firm's equality, and the firm has no debt. To raise the $30 million solely through equity, you will need to sell two-thirds of the firm. However, you would prefer to maintain at least a 50% equity stake in the firm to re

Analysis of changes in stockholders' equity accounts

Stockholders' Equity (December 31, 2002) Common Stock - $4 par value, 50,000 shares authorized, 20,000 shares issued and outstanding $80,000 Contributed capital in excess of par value, common stock $60,000 Total contributed capital $140,000 Retained Earnings $160,000 Total Stockholders' Equity $300,000 S

Equity transactions

Presented below is information related to Boston-Lee Company: a. The company is granted a charter that authorizes issuance of 15,000 shares of $100 par value preferred stock and $40,000 shares of no-par common stock. b. 8,000 shares of common stock are issued to the founders of the corporation for land valued by the board

Michigan Mining and Manufacturing: Value of equity and expected value of the firm

Can you help me get started with this assignment? C3. Now, suppose that Michigan Mining and Manufacturing's assets of $102 million and debt of $100 million. This debt must be paid off very soon. Prior to paying off the debt, MMM has an opportunity to make a high-risk investment which will cost $20 million and pay off either $

Nova Scotia General and Investment

Nova Scotia General is an all-equity firm. The firm has 200,000 shares of common stock outstanding, the EPS is $2, and all earnings are paid out to the shareholders as dividends. The current market value of the stock is $20 per share, and the opportunity cost of equity capital is 10 percent. General is considering two alterna

Debt and Equity Characteristics

Please help me for this assignment, look at the most recent Balance Sheets and the Notes to the Financial Statements for Coca Cola and Walt Disney and Compare and contrast the characteristics of the debt and equity instruments used by the two selected companies.(500 words)

Equity beta

9. The cost of equity for Ryan Corporation is 8.4%. If the expected return on the market is 10% and the risk-free rate is 5%, then the equity beta is ___. A. 0.48 B. 0.68 C. 1.25 D. 1.68 E. Impossible to calculate with information given.

Horizon value

The second acquisition target is a privately held company in a growing industry. The target has recently borrrowed $40 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. KFS expects the company to produce free cash flows of -$5 million in

Corporate Valuation Model: Calculate the market value of equity.

Using the corporate valuation model, the value of a company's operations is $750 million. The company's balance sheet shows $50 million in short-term investments that are unrelated to operations. The balance sheet also shows $100 million in accounts payable, $100 million in notes payable, $200 million in long-term debt, $40 mil

Debt and Equity Funding a Company

Please discuss the following question: What are the advantages and disadvantages of funding a company with debt or equity? Please explain.

Stockholders equity

What is the total Stockholder's Equity based on the following account balances? Paid in Capital: Common Stock $815,000 Paid-in-Capital $ 2,944,000 Retained Earnings $ 19,140,000 Treasury Stock $ 312,000 Please show work

Computing Residual Earnings

I need assistance with my studying guide The following numbers were calculated from the financial statements for a firm for 2006 2006 2005 Return on common equity (roce) 15.2% 13.3% Average common equity (millions)

Earnings-based equity valuations

In each of the following situations assume a zero-growth rate for earnings and dividends (NPVGO is zero), that all earnings are paid out as dividends, and that the earnings-based valuation model is being used. 1. Dennison Corporation's earnings are expected to be $7.00 per share and its stock price is $28.00. What is the req

Hardmon Enterprises is considering a leverages recapitalization

Hardmon Enterprises is currently an all-equity firm with an expected return of 12%. It is considering a leveraged recapitalization in which it would borrow and repurchase existing shares. a. Suppose Hardmon borrow to the point that its debt-equity ratio is .50. With this amount of debt, the debt cost of capital is 6%. Wha

Discussion on changes in Stockholders' equity

Please write (3-5 sentences) on why that the statements below is true: 1.If I invest $100 of cash and nothing more. I increase both owners' equity and assets (cash) by $100. This is one debit (asset) and one credit (owners' equity.) 2.dividends decrease stockholders' equity by increasing with a debit. Thanks.

Equity Beta and Implied Market Value of Bear Stearns

My M&A professor is asking us to calculate the new equity beta and cost of capital for question #5. I am alo being asked to come up with an implied market value for Bear Stearns. I chose $236 million as my answer but I am not sure if this is right. Please see the attached Word document. Question #5 After reading all a

Cost of common equity

The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow at 7 percent per year in the future. Carpetto's common stock sells for $23 per share, its last dividend was $2.00, and it will pay a dividend of $2.14 at the end of the current year. If the firm's beta is 1.6, the risk-free rate

Determining Cost of Equity: Bunkhouse Electronics

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 30 percent, and the current dividend yield is 2 percent. Its beta is 1.2, the market risk premium is 8 percent, and the risk-free rate is 4 percent. a. Calculate two estima

Items affecting stockholders' equity

I am needing assistance with the following I think I understand but want to be sure. For each of the following events affecting the stockholders' equity of Haulmarke, indicate whether the event would: increase retained earnings IRE), decrease retained earnings (DRE), increase common stock (ICS), or decrease common stock (DCS)

Computing Elements of Owners' Equity

Computing Elements of Owners' Equity From the information provided, determine: 1. The amount of retained earnings at December 31. 2. The amount of revenues for the period. Totals January 1 December 31 Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000 $ 15,000 All other assets . .

Reporting and Analyzing Stockholders' Equity

Problem Set P11-2A The stockholders' equity accounts of Alpha Corporation on January 1, 2007, were as follows. Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized) $400,000 Common Stock ($5 stated value, 300,000 shares authorized) $1,000,000 Paid-in Capital in Excess of Par Value?Preferred Stock $15,00

Calculate Firm L: Cost of Equity under the MM extension with growth

Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is Firm L's cost of equity? a. 11.4% b.

Stockholders' Equity: Sam Hurd Company

Sam Hurd Company has the following items: common stock, $720,000; treasure stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What amount should Sam Hurd Company report as stockholders' equity?

Statement of Shareholder's Equity

1. The following is a condensed version of the statement of shareholders' equity for Dell Computer Corporation for fiscal year ending January 31, 2003 (in millions of dollars): Balance at February 1, 2002 4,694 Net income 2,122 Unrealized gain on debt investments 26 Unrealized loss on derivative instruments (

Total value of Icarus Airlines

Ircarus Airlines is proposing to go public and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 30 percent of the company's present value, and you believe that at this capital structure the company's debtholders will demand a return of 6 percent and stockholders will requi

Impact on Stockholder's Equity

On October 31, the stockholders' equity section of Omar Company consists of common stock $600,000 and retained earnings $900,000. Omar is considering the following two courses of action: (1) declaring a 5% stock dividend on the 60,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par