This topic contains a solution. Click here to go to the answer

Author Question: Climax Motors Inc. is currently all equity financed, but it is considering a leveraged capital ... (Read 69 times)

robinn137

  • Hero Member
  • *****
  • Posts: 544
Climax Motors Inc. is currently all equity financed, but it is considering a leveraged capital structure, details of which are presented in the table below (under the column labeled 'Proposed'). Under the proposed capital structure, Climax will use all of the new debt to repurchase (and cancel) shares. Assume that taxes are zero. Assume that all of net income is paid out as a dividend in one year's time. Assume that the debt is perpetual with an annual coupon rate of 6%. Wolfgang von Trips owns 25,000 shares. Under each capital structure, how much does Wolfgang receive in dividends at the end of each year? Assume that Wolfgang has the same number of shares under both structures. 

Capital StructureCapital Structure
CurrentProposed
EBIT$120,000$120,000
Debt, D$0$450,000
Cost of Debt, kdN/A6%
Shares Outstanding100,00070,000
Stock Price$15.00$15.00

◦ Current: $30,000; Proposed: $30,000
◦ Current: $30,000; Proposed: $23,250
◦ Current: $30,000; Proposed: $42,857
◦ Current: $30,000; Proposed: $33,214
◦ Current: $30,000; Proposed: $27,684


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by robinn137 on Apr 25, 2021

bubulittle310@msn.cn

  • Sr. Member
  • ****
  • Posts: 281
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




robinn137

  • Member
  • Posts: 544
Reply 2 on: Apr 25, 2021
:D TYSM


mammy1697

  • Member
  • Posts: 341
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

In 1886, William Bates reported on the discovery of a substance produced by the adrenal gland that turned out to be epinephrine (adrenaline). In 1904, this drug was first artificially synthesized by Friedrich Stolz.

Did you know?

Increased intake of vitamin D has been shown to reduce fractures up to 25% in older people.

Did you know?

The average human gut is home to perhaps 500 to 1,000 different species of bacteria.

Did you know?

In women, pharmacodynamic differences include increased sensitivity to (and increased effectiveness of) beta-blockers, opioids, selective serotonin reuptake inhibitors, and typical antipsychotics.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

For a complete list of videos, visit our video library