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If you could help me with the d and g that would be great, thanks. Green Manufacturing Inc. plans to announce that it will issue
If you could help me with the d and g that would be great, thanks.
Green Manufacturing Inc. plans to announce that it will issue $2 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a 6 percent annual coupon rate. Green is currently an all-equity firm worth $6.3 million with 400,000 shares of common stock outstanding. After the sale of the bonds, Green will maintain the new capital structure indefinitely. Green currently generates annual pretax earnings of $1.5 million. This level of earnings is expected to remain constant in perpetuity. Green is subject to a corporate tax rate of 40 percent. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit \$ sign in your response.) a. What is the expected return on Green's equity before the announcement of the debt issue? Expected return % b. What is the price per share of the firm's equity? Price $ per share c. This part of the question is not part of your Connect assignment. d. What is Green's stock price per share immediately after the repurchase announcement? New share price g. What is the required return on Green's equity after the restructuring? Required return %Step by Step Solution
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