1. Suppose Rocky Brands has earmnings per share of $2.35 and EBITDA of $312 million. The firm also has 4.7 million shares outstanding and debt of $120 milion (not ofcash). You believe Jared's Outdoor Corporation is comparable to Rocky Brands in terms of its underlying business, but Jared's has no debt. If Jared's has a P/E of13.1 and an onterprise value to EBITDA multiple of 7.1, estimate the value of Rocky Brands stock using both multiples Which estimate is ikely to be more accurate?Rocky Brands' stock value by using the P/E ratio is S per share. (Round to two decimal places.)The value of Rocky Brands by using the PE ratio is $milion (Round to one decimal place)

Calculation of above requirement are as follows.

Answered: uppose Rocky Brands has earnings per…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter14: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 12P

See similar textbooks

Similar questions

The Rivoli Company has no debt outstanding, and its financial position is given by the following data: What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share? Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Based on the new capital structure, what is the new weighted average cost of capital? What is the levered value of the firm? What is the amount of debt? Based on the new capital structure, what is the new stock price? What is the remaining number of shares? What is the new earnings per share?
Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%. The firms WACC is 12%, and it has 15 million shares of common stock outstanding. The firm has 30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other nonoperating assets. It has 368 million in debt and 60 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?
Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?
Kaye’s Kitchenware has a market/book ratio equal to 1. Itsstock price is $12 per share and it has 4.8 million shares outstanding. The firm’s total capital is $110 million and it finances with only debt and common equity. What is itsdebt-to-capital ratio?
Baker Industries’s net income is $24,000, its interest expense is $5,000, andits tax rate is 40%. Its notes payable equals $27,000, long-term debt equals $75,000, and commonequity equals $250,000. The firm finances with only debt and common equity, so it hasno preferred stock. What are the firm’s ROE and ROIC?
The W.C. Pruett Corp. has $500,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 11%. In addition, it has $800,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $1.95 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places.
The W.C. Pruett Corp. has $450,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 11%. In addition, it has $700,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $1.62 million, its average tax rate is 25%, and its profit margin is 7%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places. TIE: × ROIC: %
BI's net income is $24,000, its interest expense is $5,000, and its tax rate is 40%. Its notes payable equals $27,000, long-term debt $75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firms ROE and ROIC?
Based on the corporate valuation model, SG Telecom's total corporate value is $750 million. Its balance sheet shows $100 million notes payable, $200 million of long-term debt, $40 million of common stock, and $160 million of retained earnings, with a WACC of 10%. If the company has 24 million shares of stock outstanding, what is its price per share? Your answer should be between 5.03 and 58.72, rounded to 2 decimal places, with no special characters.
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Expected EBIT = $600,000Growth rate in EBIT gL = 0% Cost of equity, rs = 10%Shares outstanding, n0 = 200,000 Tax rate, T (federal-plus-state) = 25% a. What is Rivoli’s intrinsic value of operations (i.e., its unlevered value)? What is its intrinsic stock price? Its earnings per share?b. . Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity , rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 7%. Based on the new capital structure, what is the new weighted average cost of capital? What is the levered value of the firm? What is th amount of debt?c. Based on the new capital structure, what is the new stock price? What is the remain-ing number of shares? What is the new earnings per share?
Book Co. has 1.3 million shares of common equity with a par (book) value of $1.30, retained earnings of $31.6 million, and its shares have a market value of $50.11 per share. It also has debt with a par value of $20.8 million that is trading at 101% of par. a. What is the market value of its equity? b. What is the market value of its debt? c. What weights should it use in computing its WACC? a. What is the market value of its equity? The market value of the equity is $ __ million ? (Round to two decimal places.)
Wail Inc. is currently a firm that has 2 million shares of stock outstanding with a market price of $25 a share and outstanding debt of $30 million. The debt interest rate is 10%. Its cost of equity is 17 percent and the tax rate is 35 percent. For some reason related to one of the controlling shareholders’ preference, the company wants to get rid of all its debt. After recapitalization, what is the cost of equity?

SEE MORE QUESTIONS

Recommended textbooks for you

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Corporate Fin Focused Approach

Finance

ISBN:

9781285660516

Author:

EHRHARDT

Publisher:

Cengage

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS