Corporate Finance: The Core, Student Value Edition Plus Mylab Finance With Pearson Etext -- Access Card Package (4th Edition)
4th Edition
ISBN: 9780134426785
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Question
Chapter 14, Problem 23P
a.
Summary Introduction
To determine: The share price of the stocks.
Introduction:
Share price: The current share price is also known market value of single share which is currently being sold or bought in the market; basically, it is price that a security is last traded.
In a company, shares are a unit of ownership interest. The individual who owns shares are called as shareholders. Shares can be classified into equity
b.
Summary Introduction
To determine: The cost of the plan for ZE and the reason why issuing equity is expensive.
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Students have asked these similar questions
The Beranek Company, whose stock price is now $20, needs to raise $30 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $16 per share because of signaling effects. The underwriters' compensation will be 4% of the issue price, so Beranek will net $15.36 per share. The firm will also incur expenses in the amount of $190,000. How many shares must the firm sell to net $30 million after underwriting and flotation expenses? Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest whole number.
Braxton Enterprises has made a before-tax profit of $300 million. The firm has no debt and 100 million shares outstanding, with a current market price of $15 per share. Braxton’s board is currently deciding whether to pay out this profit to shareholders through a dividend or a one-time share repurchase.
If the board chooses to pay a dividend, what is the ex-dividend price of the shares in a perfect capital market with no taxes?
If the board instead chooses to use the cash to do a one-time share repurchase, in a perfect capital market with no taxes, what is the price of the shares once the repurchase is complete?
Suppose that the board decides to pay a dividend. Now assume that Braxton Enterprises pays corporate taxes of 30% and the marginal tax rate for shareholders is 40%. What is the after-tax dividend and effective tax rate for shareholders:
Under a classical tax system?
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XYZ Industries has 125 million shares outstanding and has a marginal corporate tax rate of 35%. XYZ announces that it will use $75 million in excess cash to investors repurchase shares. Shareholders had previously assumed that XYZ would retain this excess cash permanently. The amount XYZt's share price can be expected to change upon this announcement is closest to:
Chapter 14 Solutions
Corporate Finance: The Core, Student Value Edition Plus Mylab Finance With Pearson Etext -- Access Card Package (4th Edition)
Ch. 14.1 - How does the risk and cost of capital of levered...Ch. 14.2 - Why are investors indifferent to the firms capital...Ch. 14.2 - What is a market value balance sheet?Ch. 14.2 - In a perfect capital market, how will a firms...Ch. 14.3 - How do we compute the weighted average cost of...Ch. 14.3 - With perfect capital markets, as a firm increases...Ch. 14.4 - If a change in leverage raises a firm's earnings...Ch. 14.4 - True or False: When a firm issues equity, it...Ch. 14.5 - Consider the questions facing Dan Harris, CFO of...Ch. 14.5 - Prob. 2CC
Ch. 14 - Consider a project with free cash flows in one...Ch. 14 - You are an entrepreneur starting a biotechnology...Ch. 14 - Acort Industries owns assets that will have an 80%...Ch. 14 - Wolfrum Technology (WT) has no debt. Its assets...Ch. 14 - Suppose there are no taxes. Firm ABC has no debt,...Ch. 14 - Suppose Alpha Industries and Omega Technology have...Ch. 14 - Prob. 7PCh. 14 - Prob. 8PCh. 14 - Zetatron is an all-equity firm with 100 million...Ch. 14 - Explain what is wrong with the following argument:...Ch. 14 - Consider the entrepreneur described in Section...Ch. 14 - Hardmon Enterprises is currently an all-equity...Ch. 14 - Suppose Visa Inc. (V) has no debt and an equity...Ch. 14 - Prob. 14PCh. 14 - Prob. 15PCh. 14 - Hartford Mining has 50 million shares that are...Ch. 14 - Mercer Corp. has 10 million shares outstanding and...Ch. 14 - In mid-2015 Qualcomm Inc. had 11 billion in debt,...Ch. 14 - Prob. 19PCh. 14 - Prob. 20PCh. 14 - Yerba Industries is an all-equity firm whose stock...Ch. 14 - Prob. 22PCh. 14 - Prob. 23PCh. 14 - Prob. 24P
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