An all-equity firm with 200,000 shares outstanding, Antwerther Inc., has $2,000,000 of EBIT, which is expected...

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An all-equity firm with 200,000 shares outstanding, AntwertherInc., has $2,000,000 of EBIT, which is expected to remain constantin the future. The company pays out all of its earnings, soearnings per share (EPS) equal dividends per shares (DPS). Its taxrate is 40%. The company is considering issuing $5,000,000 of 10.0%bonds and using the proceeds to repurchase stock. The risk-freerate is 6.5%, the market risk premium is 5.0%, and the beta iscurrently 0.95, but the CFO believes beta would rise to 1.10 if therecapitalization occurs. Assuming that the shares can berepurchased at the price that existed prior to therecapitalization, what would the price be following therecapitalization? $65.77 $69.23 $70.59 $71.33 $74.14
can you explain how to get the after the recapitalization DPS, iunderstand that is (EBIT-(rd*bonds)(1-t)/shares) , can yo tell whatis bonds and shares, respectively numbers values

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Answer Price of the Stock is 7059 a Calculation of Number Of Shares to be Bought Back Required Return Rf RmRf 65 5095 1125 Sr Particulars Amount a EBIT 2000000 See Answer

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An all-equity firm with 200,000 shares outstanding, AntwertherInc., has $2,000,000 of EBIT, which is expected to remain constantin the future. The company pays out all of its earnings, soearnings per share (EPS) equal dividends per shares (DPS). Its taxrate is 40%. The company is considering issuing $5,000,000 of 10.0%bonds and using the proceeds to repurchase stock. The risk-freerate is 6.5%, the market risk premium is 5.0%, and the beta iscurrently 0.95, but the CFO believes beta would rise to 1.10 if therecapitalization occurs. Assuming that the shares can berepurchased at the price that existed prior to therecapitalization, what would the price be following therecapitalization? $65.77 $69.23 $70.59 $71.33 $74.14can you explain how to get the after the recapitalization DPS, iunderstand that is (EBIT-(rd*bonds)(1-t)/shares) , can yo tell whatis bonds and shares, respectively numbers values