Visio LLC produces a modern selection of face shields suitable for any pandemic. The company is debt-free and achieves an EBIT of $110.9 million per year. It has 27.4 million shares outstanding and its cost of equity is 14.0%. The corporate tax rate is 27.0%. Compute the current share price. $ To grow in size, the firm contemplates a seasoned equity offering (SEO) that must net $100.0 million after all costs and fees. Underwriting fees are 7.0% of the gross proceeds and legal fees amount to $1.0 million. In addition, to ensure sufficient demand, shares would need to be offered to the public at a a discount of 14.0 percent. Given these constraints, how many shares (in million) will the firm have to place during the SEO? million shares What is the post-SEO share price assuming the cost of capital stays the same? After the SEO, the firm will invest the net proceeds into a new line of products. It expects to achieve a constant return on new investment on this part of the business every year. The overall cost of equity of the firm will not be affected. What pre-tax return on new investment is required to bring the share price back to the original value? (We are ignoring depreciation and ongoing capital expenditures here) % Visio LLC produces a modern selection of face shields suitable for any pandemic. The company is debt-free and achieves an EBIT of $110.9 million per year. It has 27.4 million shares outstanding and its cost of equity is 14.0%. The corporate tax rate is 27.0%. Compute the current share price. $ To grow in size, the firm contemplates a seasoned equity offering (SEO) that must net $100.0 million after all costs and fees. Underwriting fees are 7.0% of the gross proceeds and legal fees amount to $1.0 million. In addition, to ensure sufficient demand, shares would need to be offered to the public at a a discount of 14.0 percent. Given these constraints, how many shares (in million) will the firm have to place during the SEO? million shares What is the post-SEO share price assuming the cost of capital stays the same? After the SEO, the firm will invest the net proceeds into a new line of products. It expects to achieve a constant return on new investment on this part of the business every year. The overall cost of equity of the firm will not be affected. What pre-tax return on new investment is required to bring the share price back to the original value? (We are ignoring depreciation and ongoing capital expenditures here) %
