Author Archives: Anonymous
Nielson Motors is currently an all equity financed firm. It…
Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $14 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $40 million at an interest rate of 5% and using the proceeds to repurchase shares. Assume perfect capital markets and there is no tax. Nielson’s stock price will
Read DetailsNielson Motors is currently an all equity financed firm. It…
Nielson Motors is currently an all equity financed firm. It expects to generate EBIT of $14 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share. Nielson is considering changing its capital structure by borrowing $40 million at an interest rate of 5% and using the proceeds to repurchase shares. Assume perfect capital markets and there is no tax. Nielson’s EPS if they change their capital structure is closest to:
Read DetailsAssume that investors hold Alphabet Inc (GOOGL) stock in ret…
Assume that investors hold Alphabet Inc (GOOGL) stock in retirement accounts that are free from personal taxes. Also assume that GOOGL’s current pre-tax WACC is 12% and its corporate tax rate is 35%. If GOOGL were to issue sufficient debt at a pre-tax cost of 6% to give them a debt to value ratio of 0.4, then the Google’s after-tax WACC would be closest to:
Read DetailsSuppose that in the coming year, you expect BP stock to have…
Suppose that in the coming year, you expect BP stock to have a volatility of 32% and a beta of 0.8, and Merck’s stock to have a volatility of 22% and a beta of 1.2. The risk free interest rate is 5% and the market’s expected return is 14%. The cost of capital for a project with the same beta as BP’s stock is closest to:
Read Details