Question
please use excel to solve and show formulas Concord Inc. is an all-equity firm that has EBIT every year (forever) of $80M. The company pays
please use excel to solve and show formulas
Concord Inc. is an all-equity firm that has EBIT every year (forever) of $80M. The company pays out all of its Net Income as dividends to its shareholders every year. The company has 25M shares outstanding. The total market value of the companys equity (ie., its Market Capitalization) is currently $800M. There are no taxes. The risk-free rate is 1% and the expected market risk premium is 4%.
a. What is the expected return on Concord Inc.s equity (Re)?
b. If Concord issues $250M of risk-free perpetual debt at an interest rate of 1% (paid annually), and immediately uses the proceeds of the issuance to repurchase shares at the market price, what will be its new EPS?
c. What is Concord expected return on equity (Re) after the repurchase, and what is its price per share?
d. What is Concord equity beta (Be) both before and after the repurchase?
e.What is Concord (pre-tax) Weighted Average Cost of Capital both before and after the repurchase?
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