QUESTION 8 Promcor is an unlevered firm with a total market value of $4,300,000 with 430,000 shares of stock outstanding. The firm has expected EBIT of $360,000 if the economy is normal and $580,000 if the economy booms. The firm is considering a $1,600,000 bond issue with an attached interest rate of 6.2 percent. The bond proceeds will be used to repurchase shares. Ignore taxes. What will the earnings per share be after the repurchase if the economy booms? $1.85 $1.78 $1.71 $1.64 $1.57 QUESTION Ryder Systems has expected earnings before interest and taxes of $1,070,000, an unlevered cost of capital of 10.3 percent, and a tax rate of 25 percent. The company has $3,100,000 of debt that carries a 6.2 percent coupon. The debt is selling at par value. Assume the firm maintains this debt amount forever. What is the interest tax shield of the firm in a given year? What is the value of the firm? $48,050 and $8,247,933 $48,050 and $8,826,431 $48,050 and $8,566.262 $49.882 and $8.566.262 $50,092 and $8,566,262 QUESTION 10 Tellabs Company is currently an all equity firm. Its current cost of equity is 10.5 percent and the tax rate is 25 percent. The firm has 480,000 shares of stock outstanding with a market price of $45 a share. The firm is considering capital restructuring that allows $4.4 million of debt with a coupon rate of 6.2 percent. The debt will be sold at par value and the proceeds will be used to repurchase shares. What is the value per share after the recapitalization int: You need to determine the total value of equity after recapitalization that accounts for the PV of intelist tax shield and the number of shares outstanding after repurchased) $48.12 $47.88 $47.50 $47.20 $46.84