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Author Question: Climax Motors Inc. is currently all equity financed, but it is considering a leveraged capital ... (Read 105 times)

robinn137

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on: Apr 25, 2021
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, kd​N/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
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by robinn137 on Apr 25, 2021

bubulittle310@msn.cn

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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.
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robinn137

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Reply 2 on: Apr 25, 2021
:D TYSM

kalskdjl1212

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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