Kaelea, Inc., has no debt outstanding and a total market

1. Kaelea, Inc., has no debt outstanding and a total market value of $63,000. Earnings before interest and taxes, EBIT, are projected to be $8,600 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 21 percent higher. If there is a recession, then EBIT will be 34 percent lower. Kaelea is considering a $21,300 debt issue with a 8 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 4,200 shares outstanding. Ignore taxes for this problem.Requirement 1:(a) Calculate earnings per share, EPS, under Recession, Normal and Expansion each of the three economic scenarios before any debt is issued.$2.05; $2.05; $2.05$1.39; $2.26; $2.80$2.43; $3.48; $4.13$1.43; $2.48; $3.13$1.35; $2.05; $2.48(b) Calculate the percentage changes in EPS when the economy expands or enters a recession.-38.20%; 23.59%-34.00%; 21.00%34.00%; -21.00%-42.40%; 26.19%42.40%; -26.19%Requirement 2:Assume Kaelea goes through with recapitalization.(a) Calculate earnings per share, EPS, under Recession, Normal and Expansion each of the three economic scenarios after the recapitalization.$1.43; $2.48; $3.13$2.48; $2.48; $2.48$1.39; $2.26; $2.80$2.35; $3.05; $3.48$1.35; $2.05; $2.48(b) Calculate the percentage changes in EPS when the economy expands or enters a recession.42.40%; -26.19%-38.20%; 23.59%-34.00%; 21.00%34.00%; -21.00%-42.40%; 26.19%2. Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 775,000 shares of stock outstanding. Under Plan II, there would be 525,000 shares of stock outstanding and $9.75 million in debt outstanding. The interest rate on the debt is 7 percent, and there are no taxes.Requirement 1:(a) Assume that EBIT is $2.8 million, compute the EPS for Plan I.$4.26$3.61$7.65$4.03$4.99(b) Assume that EBIT is $2.8 million, compute the EPS for Plan II.$3.61$7.65$4.26$4.03$4.99Requirement 2:(a) Assume that EBIT is $3.3 million, compute the EPS for Plan I.$4.26$4.03$4.99$3.61$4.76(b) Assume that EBIT is $3.3 million, compute the EPS for Plan II.$4.03$3.61$4.99$4.76$4.26Requirement 3:What is the break-even EBIT?$2,115,750$512,236$2,617,500$2,800,000$2,866,9923. Blue Stripes Co. is comparing two different capital structures. Plan I would result in 8,000 shares of stock and $410,400 in debt. Plan II would result in 12,450 shares of stock and $250,200 in debt. The interest rate on the debt is 10 percent. The all-equity plan would result in 19,400 shares of stock outstanding. Ignore taxes for this problem.Required:(a) What is the price per share of equity under Plan I?$24$46$26$36$34(b) What is the price per share of equity under Plan II?$26$46$24$36$344. Cede & Co. can borrow at 11.75 percent. Cede currently has no debt, and the cost of equity is 14.50 percent. The current value of the firm is $673,000. The corporate tax rate is 35 percent.Required:What will the value be if Cede borrows $226,000 and uses the proceeds to repurchase shares?$382,450$752,100$819,900$899,000$461,5505. Fleury Co. has a 34 percent tax rate. Its total interest payment for the year just ended was $37.4 million.Required:What is the interest tax shield?$12,716,000$110,000,000$37,400,000$25,058,000$24,684,0006. Guerin Enterprises has no debt. Its current total value is $75.2 million.Requirement 1:Ignoring taxes, what will the company’s value be if it sells $34.6 million in debt?$75,200,000$22,560,000$175,466,667$52,640,000$107,428,571Requirement 2:Suppose now that the company’s tax rate is 30 percent. Assume debt proceeds are used to repurchase equity. What will its overall value be if it sells $34.6 million in debt?$109,800,000$57,160,000$75,200,000$22,560,000$85,580,0007. Guerin Enterprises has no debt. Its current total value is $72.8 million. Assume that the company sells $33.2 million in debt.Requirement 1:Ignoring taxes, what is the debt-equity ratio?0.330.842.191.431.67Requirement 2:Assume the company’s tax rate is 30 percent. What is the debt-equity ratio?0.600.841.600.680.678. Becker Industries is considering an all equity capital structure against one with both debt and equity. The all equity capital structure would consist of 48,000 shares of stock. The debt and equity option would consist of 24,000 shares of stock plus $340,000 of debt with an interest rate of 6 percent. What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.$10,200$16,800$40,800$20,400$48,9609. Martin and Sons (M and S) currently is an all equity firm with 44,000 shares of stock outstanding at a market price of $20 a share. The company’s earnings before interest and taxes are $81,000. M and S has decided to add leverage to their financial operations by issuing $350,000 of debt with a 10% percent interest rate. This $350,000 will be used to repurchase shares of stock. You own 2,200 shares of M and S stock. You also loan out funds at a 10% percent rate of interest. How many of your shares of stock in M and S must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.875 shares963 shares179 shares943 shares788 shares10. Your firm has expected earnings before interest and taxes of $1,500. Your unlevered cost of capital is 12 percent and your tax rate is 35 percent. You have debt with both a book and a face value of $2,300. This debt has a 6 percent coupon and pays interest annually. What is your weighted average cost of capital?10.92 percent11.45 percent11.83 percent11.15 percent10.98 percent11. Your portfolio is 320 shares of Sunny Morning, Inc. The stock currently sells for $102 per share. The company has announced a dividend of $3.30 per share with an ex-dividend date of April 19.Required:Assuming no taxes, how much will your stock be worth on April 19?$9,891$32,640$33,696$32,112$31,58412. Palmer, Inc., has declared a $7.20 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 30 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Palmer sells for $123 per share, and the stock is about to go ex-dividend.Required:What do you think the ex-dividend price will be?$117.96$123.00$115.80$130.20$128.0413 The owners’ equity accounts for Trans World International are shown here:Common stock ($1 par value) $ 35,000 Capital surplus 212,000 Retained earnings 700,000 _______________________________________________________________Total owners’ equity $ 947,000 Requirement 1:Trans World declares a two-for-one stock split.(a) How many shares are outstanding now?105,00035,00070,00052,50017,500(b) What is the new par value per share?$5.00 per share$1.00 per share$2.00 per share$0.50 per share$2.00 per shareRequirement 2:Trans World declares a one-for-five reverse stock split.(a) How many shares are outstanding now?175,00014,00094,5007,00035,000(b) What is the new par value per share?$2.00 per share$1.00 per share$5.00 per share$2.00 per share$0.50 per share14. Bermuda Triangle Corporation (BTC) currently has 370,000 shares of stock outstanding that sell for $100 per share. Assuming no market imperfections or tax effects exist.Required:Determine the share price and new number of shares outstanding if:(a-1) If BTC has a five-for-three, what is the new share price?$60.00$72.46$100.00$89.29$166.67(a-2) If BTC has a five-for-three, how many shares will be outstanding?838,667370,000616,667222,000592,000(b-1) BTC has a 12 percent stock dividend price per share.$112.00$138.00$89.29$60.00$100.00(b-2) BTC has a 12 percent stock dividend shares outstanding.350,179392,200414,400330,357370,000(c-1) BTC has a 38.0 percent stock dividend price per share.$72.46$89.29$138.00$100.00$138.00(c-2) BTC has a 38.0 percent stock dividend shares outstanding.370,000510,600268,116638,116440,300(d-1) BTC has a four-for-seven reverse stock split price per share.$57.14$172.46$132.46$100.00$175.00(d-2) BTC has a four-for-seven reverse stock split shares outstanding.290,714647,500581,429370,000211,42915. The balance sheet for Price Cut
, Inc., is shown here in market value terms. There are 27,000 shares of stock outstanding.Market Value Balance Sheet____________________________________________________________________Cash $117,000Fixed assets 489,960 Equity $606,960____________________________________________________________________Total $606,960 Total $606,960________________________________________________________________________________________________________________________________________The company has declared a dividend of $1.40 per share. The stock goes ex-dividend tomorrow. Ignore all tax effects.Requirement 1:What is the stock selling for today?$22.48$18.15$31.47$21.08$29.51Requirement 2:What will it sell for tomorrow?$21.08$29.51$18.15$22.48$31.4716. The company with the common equity accounts shown here has decided on a two-for-one stock split. The firm’s 31-cent-per-share cash dividend on the new (postsplit) shares represents an increase of 5 percent over last year’s dividend on the presplit stock.Common stock ($1 par value) $ 530,000Capital surplus 1,561,000Retained earnings 3,890,000___________________________________________________________________Total owners’ equity $ 5,981,000Requirement 1:What is the new par value of the stock?$1.31 per share$0.50 per share$2.00 per share$0.59 per share$1.00 per shareRequirement 2:What was last year’s dividend per share?$1.00$0.31$0.50$0.59$0.6217. You own 470 shares of Abco, Inc. stock. The company has stated that it plans on issuing a dividend of $0.60 a share at the end of this year and then issuing a final liquidating dividend of $2.90 a share at the end of next year. Your required rate of return is 6 percent. Ignoring taxes, what is the value of one share of this stock today?$3.44$3.15$3.50$4.43$3.3018. Merlo, Inc. maintains a debt-equity ratio of 0.25 and follows a residual dividend policy. The company has after-tax earnings of $2,500 for the year and needs $2,200 for new investments. What is the total amount Merlo will pay out in dividends this year?$440$0$240$740$1,70019. A firm has a market value equal to its book value. Currently, the firm has excess cash of $200 and other assets of $5,300. Equity is worth $5,500. The firm has 550 shares of stock outstanding and net income of $1,300. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?530 shares560 shares540 shares550 shares520 shares20. Robinson’s has 45,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $50 a share. The balance sheet shows $45,000 in the common stock account, $510,000 in the paid in surplus account, and $520,000 in the retained earnings account. The firm just announced a 5-for-2 stock split. How many shares of stock will be outstanding after the split?94,500 shares18,000 shares112,500 shares180,000 shares112,000 shares++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++Hello, I’m looking for assistance with this assignment. I’m just learning this material now and just want to make sure I’m doing the work correctly. Could you please show all work for each questions so that I fully understand how to solve each problem. If possible could you please use formulas and NOT EXCEL. When it comes time to take the exam I need to understand how to solve each problem long-hand. It’s ruff because I’m taking this class online so I don’t have a professor to ask my questions and make sure my work is correct. If you have any questions please let me know. I”ll be online.Thank you much!Tag- “To be solved by DKhetan”