Problem 16-7 Leverage and Stock Value [LO1] Bellwood Corp. is comparing...
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Problem 16-7 Leverage and Stock Value [LO1]
| Bellwood Corp. is comparing two different capital structures. Plan I would result in 24,000 shares of stock and $82,500 in debt. Plan II would result in 18,000 shares of stock and $247,500 in debt. The interest rate on the debt is 4 percent. Assume that EBIT will be $85,000. An all-equity plan would result in 27,000 shares of stock outstanding. Ignore taxes. |
| What is the price per share of equity under Plan I? Plan II? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
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Problem 16-11 M and M and Taxes [LO2]
| Thrice Corp. uses no debt. The weighted average cost of capital is 8.9 percent. The current market value of the equity is $17.5 million and the corporate tax rate is 25 percent. |
| What is EBIT? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
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