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Please solve the incorrect parts only. Green Manufacturing Inc. plans to announce that it will issue $2.08 million of perpetual debt and use the proceeds
Please solve the incorrect parts only.
Green Manufacturing Inc. plans to announce that it will issue $2.08 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a 5 percent annual coupon rate. Green is currently an all-equity firm worth $7.75 million with 480,000 shares of common stock outstanding. After the sale of the bonds, Green will maintain the new capital structure indefinitely. Green currently generates annual pre-tax earnings of $1.58 million. This level of earnings is expected to remain constant in perpetuity. Green is subject to a corporate tax rate of 35 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 13.25 % b. What is the price per share of the firm's equity? Price $ 16.15 per share c. Not available in Connect. d. What is Green's stock price per share immediately after the repurchase announcement? New share price $ 17.61 e-1. How many shares will Green repurchase as a result of the debt issue? Shares repurchased 114,026.12 e-2. How many shares of common stock will remain after the repurchase? New shares outstanding 365,973.88 g. What is the required return on Green's equity after the restructuring? Required return 22.14 %Step by Step Solution
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