Question
Admiral and Hiscox are two identical companies with identical business risks and perfectly correlated earnings. Both companies are listed on London Stock Exchange. Each firm
Admiral and Hiscox are two identical companies with identical business risks and perfectly correlated earnings. Both companies are listed on London Stock Exchange. Each firm is expected to have earnings before the interest of $22 million. Admiral's debt has a market value of $90 million and its debt cost is 5%. Admiral's stock sells for £24 and has 4.5 million outstanding shares. Hiscox has 8 million outstanding shares worth £27 each and has no debt.
-Assume that both companies?
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1 Earning per share EBIT Interest rate Number of shares outstanding Admirals EPS 22 million 90 milli...
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Financial Accounting Theory
Authors: William R. Scott
7th edition
132984660, 978-0132984669
