Your firm is currently 100% equity financed. the cfo is considering a recapitalization plan under which the firm would issue long-term debt with an after-tax yield of 9% and use the proceeds to repurchase some of its common stock. the recapitalization would not change the company's total investor-supplied capital, the size of the firm (i. e., total assets), and it would not affect the firm's return on investors' capital (roic), which is 15%. the cfo believes that this recapitalization would reduce the firm's wacc and increase its stock price. which of the following would be likely to occur if the company goes ahead with the recapitalization plan?
a. the company's roa would increase.
b. the company's roe would decline.
c. the company's earnings per share would decline.
d. the company's net income would increase.
e. the company's cost of equity would increase.
Answers: 1
Business, 22.06.2019 08:00
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Business, 22.06.2019 17:00
During which of the following phases of the business cycle does the real gdp fall? a. trough b. expansion c. contraction d. peak
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Business, 22.06.2019 19:20
Six years ago, an 80-kw diesel electric set cost $160,000. the cost index for this class of equipment six years ago was 187 and is now 194. the cost-capacity factor is 0.6. the plant engineering staff is considering a 120-kw unit of the same general design to power a small isolated plant. assume we want to add a precompressor, which (when isolated and estimated separately) currently costs $13291. determine the total cost of the 120-kw unit. (hint: skip $ and comma symbols)
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Business, 22.06.2019 19:30
Problem page a medical equipment industry manufactures x-ray machines. the unit cost c (the cost in dollars to make each x-ray machine) depends on the number of machines made. if x machines are made, then the unit cost is given by the function =cx+−0.3x2126x31,935 . how many machines must be made to minimize the unit cost?
Answers: 3
Your firm is currently 100% equity financed. the cfo is considering a recapitalization plan under wh...
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