RECAPITALIZATION Tartan Industries currently has total capital equal to $4 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $1 million, and distributes 40% of its earnings as dividends. Net income is expected to grow at a constant rate of 3% per year, 200,000 shares of stock are outstanding, and the current WACC is 12.30%.
The company is considering a recapitalization where it will issue $2 million in debt and use the proceeds to repurchase stock. Investment bankers have estimated that if the company goes through with the recapitalization, its before-tax cost of debt will be 10% and its cost of equity will rise to 15.5%.
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals of Financial Management (MindTap Course List)
Cornerstones of Financial Accounting
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Principles of Macroeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Foundations of Business (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
Financial & Managerial Accounting
Essentials of Business Communication (MindTap Course List)
Corporate Financial Accounting
Principles of Economics (MindTap Course List)
Accounting Information Systems
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Probability and Statistics for Engineering and the Sciences
Management, Loose-Leaf Version
Financial Accounting
Financial And Managerial Accounting
Essentials of Economics (MindTap Course List)
College Accounting, Chapters 1-27
Contemporary Marketing
Financial & Managerial Accounting
Managerial Accounting: The Cornerstone of Business Decision-Making
College Accounting (Book Only): A Career Approach
Accounting Information Systems
Intermediate Accounting: Reporting And Analysis
Financial Accounting
MKTG 12:STUDENT ED.-TEXT
Fundamentals of Financial Management (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Pkg Acc Infor Systems MS VISIO CD
Accounting (Text Only)
College Accounting (Book Only): A Career Approach
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Exploring Economics
Principles of Macroeconomics (MindTap Course List)
Statistics for Business & Economics, Revised (MindTap Course List)
Corporate Financial Accounting
Survey of Accounting (Accounting I)
Economics (MindTap Course List)
Microeconomics
Purchasing and Supply Chain Management
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Practical Management Science
Economics For Today
Macroeconomics
Cornerstones of Cost Management (Cornerstones Series)
Macroeconomics: Private and Public Choice (MindTap Course List)
Principles of Microeconomics
Managerial Accounting
Microeconomics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
Understanding Management (MindTap Course List)