Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please only answer questions 25 and 26. the rest are for your reference (Use the following information for problems 2226 ) The XYZ Company (XCYZ

please only answer questions 25 and 26. the rest are for your reference
image text in transcribed
image text in transcribed
image text in transcribed
(Use the following information for problems 2226 ) The XYZ Company (XCYZ currently has $200,000 market value (and book value) of peripetual debt outstanding carryeng a coupon rate of 6 percent. its eamings before interest and taxes (EBIT) are $100000, and it is a ztro - growth compary with 1008 payout ratio. XYZs current cost of equity is 8.8 percent. and its tax cate Is 40 percent. The firm has 10,000 shares of common stock cutstanding selling at a price per share of $60,00. Question 22 1.pts What is XYZ curfent total inarket value and wesghted arerage cost of capital? Question 23 1. pts XYZ is considering issuing $200,000 of add tional debt and using the proceeds to repurchase stock. it is estimated that if the leverage were increased ty raising the level of debt to $400,000, the interest rate on the new debt would rise to 8%, and cost of equity would rise to 9.6 percent. The old 6 percent debt is senior to the new debt, and it would remain outstanding, continue to yield 6 percent, and have a market value of 5200 ,000, if this plan were carried out, what would be XYZ's niew total value? 5790000 4800008 What would be XYZ s new WACC? \begin{tabular}{|l} 7.399 \\ 7.06% \\ 7.509 \\ 7.8006 \\ \hline 8.208 \\ \hline \end{tabular} Question 25 What would be XYZ 's new stock price per share at debt level of $400.000 ? $58 560 561 565 569 What would be XYZ's new stock price per share at debt level of $400,000 ? Question 26 How many shares approximately would XYZ repurchase in the recapitization? 3,075 4,250 4,500 5,000 5,250

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Management

Authors: Geert Bekaert, Robert J. Hodrick

1st Edition

0131163604, 9780131163607

More Books

Students also viewed these Finance questions