1. Yellow Corp. is evaluating an extra dividend versus a share repurchase. In either case, $4,500 would be spent. Current earnings are $0.96 per share and the stock currently sells for $43 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections.

a. If Yellow Corp. pays a dividend, what will be the dividend per share? After the dividend is paid, how many shares will be outstanding and what will the price per share be? Enter your answers rounded to 2 DECIMAL PLACES.

NOTE: Fractional shares are possible (Ex. 0.37 shares)

Dividend = Correct response: 2.250.01

Shares outstanding = Correct response: 2,000

Stock price = Correct response: 40.750.01

b. After the $2.25 dividend, the price falls to $40.75 per share. What are earnings per share (EPS) and the price earnings (P/E) ratio?Enter your answers rounded to 2 DECIMAL PLACES.

EPS= Correct response: 0.96

P/E Ratio = Correct response: 42.450.1

c. If Yellow Corp. goes with the share repurchase, how many shares will they buy? After the repurchase, how many shares will be outstanding and what will the price per share be?Enter your answers rounded to 2 DECIMAL PLACES.

Shares repurchased =

Shares outstanding =

Stock price =

2. Mitra Corporation is currently all equity financed and has a value of $60 million. Investors currently require a return of 15.2 percent on common stock. Mitra has a marginal tax rate of 20 percent.Mitra plans to issue $10 millionof debt with a return of 4.5 percent and use the proceeds to repurchase common stock.

a. What will be the value of the firm after the debt issue?Please state your answer in millions rounded to two decimal places.

Enter your response below.

Correct response: 620.01million

b. Given that the value of the firm after the debt issue will be $62 million, what will be the value of the equity after the debt issue?Please state your answer in millions rounded to two decimal places.

Enter your response below.

Correct response: 520.01million

c. Given that the value of the equity after the debt issue will be $52 million, what will be the expected return on the stock after the debt issue? Enter your answer as a percentage and round to 2 decimal places. Do not enter the percentage sign as part of your answer.

Enter your response below.

3. Rozanski Co. currently has EBIT of $47,000 and is all equity financed. EBIT are expected to grow at a rate of 4% per year. The firm pays corporate taxes equal to 39% of taxable income. The cost of equity for this firm is 19%.

What is the market value of the firm? Enter your answer rounded to two decimal places.

Correct response: 191,133.330.01

Click "Verify" to proceed to the next part of the question. This question has 3 parts, so you will be clicking verify 3 times.

Suppose the firm has a value of $191,133.33 when it is all equity financed. Now assume the firm issues $70,000 of debt paying interest of 10% per year and uses the proceeds to retire equity. The debt is expected to be permanent.

a. What will be the value of the firm? Enter your answer rounded to two decimal places.

Correct response: 218,433.330.01

b. What will be the value of the equity after the debt issue? Enter your answer rounded to two decimal places.

Correct response: 148,433.330.01

c. Suppose that with the $70,000of debt and no costs to financial distress the firm has a value of $218,433.33. Suppose, in addition:

1) The debt issue raises the possibility of bankruptcy.

2) The firm has a 17% chance of going bankrupt after 3 years.

3) If it goes bankrupt, it will incur bankruptcy costs of 80,000.

4) The discount rate is 19%.

What is the value of the firm? Enter your answer rounded to two decimal places.