This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Caf Americain Coffee Inc. is all equity financed and generates perpetual annual EBIT of $600. Assume ... (Read 74 times)

sarasara

  • Hero Member
  • *****
  • Posts: 521
on: Apr 25, 2021

Question 1

Bob's Farm Rental and Party Supply posted an EBIT of $45,000 and has no investments in working capital or assets. Shareholders are requiring a return of 22%. Calculate the value of the company. Assume a tax rate of 15%.
◦ $204,545
◦ $173,864
◦ $300,000
◦ $234,000 
◦ $217,865

Question 2

Café Americain Coffee Inc. is all equity financed and generates perpetual annual EBIT of $600. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that Café Americain has a 100% payout rate, 1,000 shares outstanding, and that shareholders require a return of 6%. Assume that the tax rate is 0%. 
Café Americain is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares at the price of $10.00 per share. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds worth a total sum of $2,000 and a coupon rate (and yield) of 4%. Assume that the tax rate is 0%.
If Café Americain goes ahead with the repurchase, then what is the required return of stock holders after the repurchase is complete?
◦ 6.1%
◦ 6.2%
◦ 6.3%
◦ 6.4%
◦ 6.5%
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
Buy Test-Bank


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by sarasara on Apr 25, 2021

Cnarkel

  • Sr. Member
  • ****
  • Posts: 339
Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 35% of students answer this correctly


sarasara

  • Member
  • Posts: 521
Reply 2 on: Apr 25, 2021
Excellent

patma1981

  • Member
  • Posts: 292
Reply 3 on: Yesterday
Gracias!

« previous next »
 

Did you know?

Signs of depression include feeling sad most of the time for 2 weeks or longer; loss of interest in things normally enjoyed; lack of energy; sleep and appetite disturbances; weight changes; feelings of hopelessness, helplessness, or worthlessness; an inability to make decisions; and thoughts of death and suicide.

Did you know?

Chronic necrotizing aspergillosis has a slowly progressive process that, unlike invasive aspergillosis, does not spread to other organ systems or the blood vessels. It most often affects middle-aged and elderly individuals, spreading to surrounding tissue in the lungs. The disease often does not respond to conventionally successful treatments, and requires individualized therapies in order to keep it from becoming life-threatening.

Did you know?

As of mid-2016, 18.2 million people were receiving advanced retroviral therapy (ART) worldwide. This represents between 43–50% of the 34–39.8 million people living with HIV.

Did you know?

Approximately one in three babies in the United States is now delivered by cesarean section. The number of cesarean sections in the United States has risen 46% since 1996.

Did you know?

The most common treatment options for addiction include psychotherapy, support groups, and individual counseling.

How noncyclic electron flow during the light reactions generates ATP and NADPH. How noncyclic electron flow during the light reactions generates ATP and NADPH.
Annual Federal Deficit (or Surplus), 1992–2016 Annual Federal Deficit (or Surplus), 1992–2016
Temperature gradient generates a global pattern of circulation Temperature gradient generates a global pattern of circulation
An organizational specialist is hired as a consultant to a company planning to open a coffee ... An organizational specialist is hired as a consultant to a company planning to open a coffee ...
Determine the nominal annual rate of interest of the following ordinary general annuity. Determine the nominal annual rate of interest of the following ordinary general annuity.
Jia's Fashions recently paid a $2 annual dividend. The company is projecting that its ... Jia's Fashions recently paid a $2 annual dividend. The company is projecting that its ...
Video: Stretch reflex & Tendon reflex

For a complete list of videos, visit our video library