River Cruises is an entirely equity financed company The current position of the company is as follows Number of shares 124000 Price per share $ 14 Operating income $ 152,000 Earning per share $ 1 23 The CFO of the company is proposing to issue new debt and repurchase the share using the cash from issuing the debt as follows Amount of debt issue $ 868,000 Interest rate of debt 7 e What will be the value of company after the proposed changes in capital structure assuming that the company pays 25 tax f What will be the return on equity and return on asset (weighted average cost of capital) with the proposed change assuming that the company pays 25 tax g If the proposed new capital structure induces agency costs and bankruptcy costs, what will the value of the after company Given that the present value of expected agency cost is $10,000 and the present value of expected bankruptcy cost is $15,000 The tax rate is 25

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River Cruises is an entirely equity financed company  The current position of the company is as follows  Number of shares 124000 Price per share $ 14 Operating income $ 152,000 Earning per share $ 1 23 The CFO of the company is proposing to issue new debt and repurchase the share using the cash from issuing the debt as follows  Amount of debt issue $ 868,000 Interest rate of debt 7  e  What will be the value of company after the proposed changes in capital structure assuming that the company pays 25  tax  f  What will be the return on equity and return on asset (weighted average cost of capital) with the proposed change assuming that the company pays 25  tax  g  If the proposed new capital structure induces agency costs and bankruptcy costs, what will the value of the after company  Given that the present value of expected agency cost is $10,000 and the present value of expected bankruptcy cost is $15,000  The tax rate is 25

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River Cruises is an entirely equity financed company. The current position of the company is as follows: Number of shares 124000 Price per share $

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River Cruises is an entirely equity financed company. The current position of the company is as follows:

Number of shares	124000
Price per share	$ 14
Operating income	$ 152,000
Earning per share	$ 1.23

The CFO of the company is proposing to issue new debt and repurchase the share using the cash from issuing the debt as follows:
Amount of debt issue	$ 868,000
Interest rate of debt	7%

e. What will be the value of company after the proposed changes in capital structure assuming that the company pays 25% tax?
f. What will be the return on equity and return on asset (weighted average cost of capital) with the proposed change assuming that the company pays 25% tax?
g. If the proposed new capital structure induces agency costs and bankruptcy costs, what will the value of the after company? Given that the present value of expected agency cost is $10,000 and the present value of expected bankruptcy cost is $15,000. The tax rate is 25%.