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ng, the per-share price, and the debt-to-equity ratio for Focus if it adopts the proposed recapitalization. nd the return on equity (ROE) for Focus under the current and proposed capital structures. e for both capital structures. both capital structures. ng for Focus if it adopts the proposed recapitalization is shares. (Round to the nearest whole number.) dopts the proposed recapitalization is $ (Round to the nearest dollar.) (Round to two decimal places.) it adopts the proposed recapitalization is r Focus under the current capital structure is $ (Round to the nearest cent.) Focus under the proposed capital structure is $ (Round to the nearest cent.)

ng, the per-share price, and the debt-to-equity ratio for Focus if it adopts the proposed recapitalization. nd the return on equity (ROE) for Focus under the current and proposed capital structures. e for both capital structures. both capital structures. ng for Focus if it adopts the proposed recapitalization is shares. (Round to the nearest whole number.) dopts the proposed recapitalization is $ (Round to the nearest dollar.) (Round to two decimal places.) it adopts the proposed recapitalization is r Focus under the current capital structure is $ (Round to the nearest cent.) Focus under the proposed capital structure is $ (Round to the nearest cent.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 4P
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Recapitalization A proposed recapitalization plan for Focus Corporation would change its current all-equity capital structure to leveraged capital structure. The proposal is for Focus to sell $53,000,000 worth of long-term debt at an interest rate of 7% and then repurchase as many shares as possible at a price of $25 per share. Focus currently has 4,700,000 shares outstanding and expects EBIT to be $22,000,000 per year in perpetuity. Ignoring taxes, calculate the following: a. The number of shares outstanding, the per-share price, and the debt-to-equity ratio for Focus if it adopts the proposed recapitalization. b. The earnings per share (EPS) and the return on equity (ROE) for Focus under the current and proposed capital structures. c. The EBIT where EPS is the same for both capital structures. d. The EBIT where EPS is zero for both capital structures. a. The number of shares outstanding for Focus if it adopts the proposed recapitalization is shares. (Round to the nearest whole number.) (Round to the nearest dollar.) (Round to two decimal places.) The per-share price for Focus if it adopts the proposed recapitalization is $ The debt-to-equity ratio for Focus if it adopts the proposed recapitalization is b. The earnings per share (EPS) for Focus under the current capital structure is $ The earnings per share (EPS) for Focus under the proposed capital structure is $ The return on equity (ROE) for Focus under the current capital structure is %. The return on equity (ROE) for Focus under the proposed capital structure is c. The EBIT where EPS is the same for both capital structures is $ (Round to the nearest cent.) (Round to the nearest cent.) (Round to two decimal places.) %. (Round to two decimal places.) (Round to the nearest dollar.) d. The EBIT where EPS is zero for both capital structures is $ (Round to the nearest dollar.)
Transcribed Image Text:Recapitalization A proposed recapitalization plan for Focus Corporation would change its current all-equity capital structure to leveraged capital structure. The proposal is for Focus to sell $53,000,000 worth of long-term debt at an interest rate of 7% and then repurchase as many shares as possible at a price of $25 per share. Focus currently has 4,700,000 shares outstanding and expects EBIT to be $22,000,000 per year in perpetuity. Ignoring taxes, calculate the following: a. The number of shares outstanding, the per-share price, and the debt-to-equity ratio for Focus if it adopts the proposed recapitalization. b. The earnings per share (EPS) and the return on equity (ROE) for Focus under the current and proposed capital structures. c. The EBIT where EPS is the same for both capital structures. d. The EBIT where EPS is zero for both capital structures. a. The number of shares outstanding for Focus if it adopts the proposed recapitalization is shares. (Round to the nearest whole number.) (Round to the nearest dollar.) (Round to two decimal places.) The per-share price for Focus if it adopts the proposed recapitalization is $ The debt-to-equity ratio for Focus if it adopts the proposed recapitalization is b. The earnings per share (EPS) for Focus under the current capital structure is $ The earnings per share (EPS) for Focus under the proposed capital structure is $ The return on equity (ROE) for Focus under the current capital structure is %. The return on equity (ROE) for Focus under the proposed capital structure is c. The EBIT where EPS is the same for both capital structures is $ (Round to the nearest cent.) (Round to the nearest cent.) (Round to two decimal places.) %. (Round to two decimal places.) (Round to the nearest dollar.) d. The EBIT where EPS is zero for both capital structures is $ (Round to the nearest dollar.)
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Can you explain on how to find the calculations for all parts for B, C and D? This is where it gets confusing.

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