Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. bnp inc. is an all-equity firm with 12,000 shares

BNP Inc. is an all-equity firm with 12,000 shares outstanding. The current stock price is...

90.2K

Verified Solution

Question

Accounting

image
BNP Inc. is an all-equity firm with 12,000 shares outstanding. The current stock price is $40 per share. The company is planning to issue a perpetual debt to buy back its stocks. It can either borrow $120,000 at 4% or $180,000 at 6%. The current EBIT is $120,000 and the tax rate is 30%. [Keep at least 2 decimal places for dollar amounts and 4 decimal places for rates] 1. Calculate the current cost of capital. 2. Calculate the debt equity ratios after the two recapitalization plans. 3. Calculate the cost of equity after the two recapitalization plans. 4. Calculate the stock prices after the two recapitalization plans. 5. Calculate the breakeven EBIT between the two proposed recapitalization plans

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students