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a) Lockhart’s Bookstores is trading at $54 per share. There are280 million shares outstanding. what is the market capitalizationof the company?

b) The MedTech company recently reported netprofits after taxes of $15.8million. It has 2.5 million shares ofcommon stock outstanding and pays preferred dividends of $ 1million per year.

  1. compute the firm’s earnings per share (EPS)

(II) Assuming that the stock currently tradesat $60 per share, determine what the firm’s dividend yield would beif it paid $2 per share to common stockholders.

(iii) what would the firms dividend payoutratio be if it paid $2 per share in dividends ?

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Hubert Koch
Hubert KochLv2
28 Sep 2019

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can someone help to solve this problem?

2-The capital structure of a company consists of debt, common equity, and preferred stock. The firm has 10 million shares of common stock outstanding, 500,000 shares of preferred stock outstanding, and 200,000 bonds outstanding with $1,000 par value each. The common stock currently trades for $50 per share and has a beta of 1.80, the preferred stock pays annual dividend of $10 per share in perpetuity and currently sells for $100 per share, and the bonds are currently sell for 110 percent of par. The market risk premium is 6 percent, Treasury bills are yielding 4 percent, and the firm’s tax rate is 35 percent. The before-tax cost of debt is 8 percent.

a) What is the firm’s weighted average cost of capital (WACC or RWACC)?

b) The firm is evaluating a new 5-year investment project that has the same risk as the firm’s typical project. The project requires an initial investment of $20 million. It is expected to generate annual after-tax cash flows of $8 million for 5 years. The project has no net working capital requirement and no salvage value. Find the net present value (NPV) of the project.

can someone help to solve this problem?

2-The capital structure of a company consists of debt, common equity, and preferred stock. The firm has 10 million shares of common stock outstanding, 500,000 shares of preferred stock outstanding, and 200,000 bonds outstanding with $1,000 par value each. The common stock currently trades for $50 per share and has a beta of 1.80, the preferred stock pays annual dividend of $10 per share in perpetuity and currently sells for $100 per share, and the bonds are currently sell for 110 percent of par. The market risk premium is 6 percent, Treasury bills are yielding 4 percent, and the firm’s tax rate is 35 percent. The before-tax cost of debt is 8 percent.

a) What is the firm’s weighted average cost of capital (WACC or RWACC)?

b) The firm is evaluating a new 5-year investment project that has the same risk as the firm’s typical project. The project requires an initial investment of $20 million. It is expected to generate annual after-tax cash flows of $8 million for 5 years. The project has no net working capital requirement and no salvage value. Find the net present value (NPV) of the project.

The following financial data on the Bond Recording Company are​ available:

The firm is currently considering whether it should use ​$400,000 of its earnings to help pay cash dividends of ​$1.00 per share or to repurchase stock at ​$29 per share.

a. Approximately how many shares of stock can the firm repurchase at the ​$29-per-share price, using the funds that would have gone to pay the cash​ dividend?

b.  Calculate the EPS after the repurchase.

c. If the stock still sells at 14 times​ earnings, what will the market price be after the​ repurchase?

d. Compare the​ pre- and​ post-repurchase earnings per share.

e.  Compare and contrast the​ stockholders' positions under the dividend and repurchase alternatives. What are the tax implications under each​ alternative?

Earnings available for common stockholders $800,000
Number of shares of common stock outstanding 400000
Earnings per share ($800,000/400,000) $2
Market price per share $28
Price/earnings (P/E) ratio ($28/$2) 14

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