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Check my work 1 River Cruises is all-equity-financed. 10 points Number of whares Price per share Market value of shares Out Date 100.000 . 10 11,000,000 Outcomes State of the room Normal . 74,500 $ 120,000 3 185,500 Sko Profit before it Ah Suppose it now issues $250.000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares as a percent rounded to 2 decimal places.) Data 5 10 Number of Price per share Mart Malue of de Outcomes State of the com Shum Norma 500 $ 3000 1 Boom 550 Proove 3 Protits before interest Slump Normal Boom 74,500 $ 124,000 6 185,500 10 points Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25.000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares as a percent rounded to 2 decimal places.) Skipood Data A $ 10 Number of shares Price per share Market value of shares Market value of debt Neces Outcomes State of the Economy Slump Normal 74,500 $ 124.000 $ Boom 185.500 5 Profits before interest Interest Equity Gaming Earnings per than Ratum on shares Exprechod Outcome WO Reliable Gearing currently is all-equity-financed. It has 28,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $380,000 with the proceeds used to buy back stock. The high-debt plan would exchange $580,000 of debt for equity. The debt will pay an interest rate of 10%. The firm pays no taxes. a. What will be the debt-to-equity ratio if it borrows $380,000? (Round your answer to 2 decimal places.) Debt-to oquity ratio b. If earnings before interest and tax (EBIT) are $290,000. what will be earnings per share (EPS) Reliable botrows $380,000? (Round your answer to 2 decimal places.) EPS c. What Will EPS be if it borrows $580.000? (Round your answer to 2 decimal places.) EPS Check my work "Increasing financial leverage increases both the cost of debt de and the cost of equity reguity! So the overall cost of capital cannot stay constant. This problem is designed to show that the speaker is confused Buggins Inc. is financed equally by debt and equity, each with a market value of S1 million. The cost of debt is 6%, and the cost of equity is 12%. The company now makes a further Issue of debt and uses the proceeds to repurchase equity. This causes the cost of debt to rise to 7% and the cost of equity to rise to 15%. Assume the firm pays no taxes .. After the debt issue, what percent of the firm is financed with debt? (Do not round intermediate calculations Enter your answers a whole percent.) Percentage of delit b. After the debt issue, what percent of the firm in financed with equity? (Do not round intermediate calculations. Enter your answer as a whole percent.) Percentage way c. What is the overall cost of capital (Enter your answer as a percent rounded to 1 decimal place) Conto Astromet is financed entirely by common stock and has a beta of 150. The firm pays no taxes. The stock has a price earnings multiple of 14.0 and is priced to offer a 11.8% expected return. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 4.0%. Calculate the following Required: a. The beta of the common stock after the refinancing b. The required return and risk premium on the common stock before the refinancing c. The required return and risk premium on the common stock after the refinancing d. The required return on the debt The required totum on the company the stock and debt combined after the refinancing Y EBIT remains constant t. What is the percentage increme in earnings pet share after the refinancing? g-1. What is the new price-comings multiple? 9.2. Has anything happened to the stock price? Complete this question by entering your answers in the tabs below. RE a. The beta of the star thermanong (Enter your rundt i decine D. The required return and risk premium on the common stock before the refinancing der vor percent rounded to 1 d.) The required and risk prem on the common stock after the refinancing te vertrounded to 1 decimal) 1 4. The roured return on the debate your unded to deal) e. The required on the sandet med her the nanong net rotermediat caut Enter) Req Ato E Reg F to G2 a. The beta of the common stock after the refinancing (Enter your answer rounded to 1 decimal place.) b. The required return and risk premium on the common stock before the refinancing (Enter your answer as a percent rounded to 1 decimal place.) 6. The required return and risk premium on the common stock after the refinancing (Enter your answer as a percent rounded to 1 decimal place.) d. The required return on the debt (Enter your answer as a percent rounded to 1 decimal place.) e. The required return on the company (1.e., stock and debt combined) after the refinancing (Do not found intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) Show less a, Beta of the common stock b Required retum (before refinancing) Risk premium (before refinancing) Required return (after refinancing) Risk premium (after refinancing) d. Required retum Required return % % X % % Reg F to G2 > Complete this question by entering your answers in the tabs below. Reg A to E Req F to G2 f. IF EBIT remains constant. What is the percentage increase in earnings per share after the refinancing? (Do not round Intermediate calculations. Enter your answer as a whole percent.) 9-1. If EBIT remains constant. What is the new price-earings multiple? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) 9-2. Has anything happened to the stock price? Show less f. Increase in eamings per share 9-1. New price earnings multiple 9.2. Has anything happened to the stock price?