total market value of the firm’s stock, accounting homework help

There is 10 questions that I need it by tomorrow at noon.

question 1 = 20,000,000

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question 2= 23,000,000

question 10 = first option

I run out time to answer the questions

Question

The following information is available for Berkwalter Investments: 1) EBIT=$6.2 million.  2) Tax rate is 35%.  3) Debt (at 10% interest rate) is valued at $3 million.  4) There are 800,000 shares of common stock outstanding.  5) The current stock price is $25.  and 6) The expected rate of return on stock is 20%.  What is the total market value of the firm’s stock?

Question

What is the total market value of the entire firm?

Question

What is the after-tax cost of debt?

Question

 What is the firm’s WACC?

Question

Assuming that the FCF is EBIT(1-T)and the value of the firm can be calculated as FCF/WACC, what is the value of the firm?

Question

Assume the firm borrows $10.2 million at 12% and uses all of these funds to purchase back from shareholders 375,000 shares.  What is the new market value of the total outstanding stock?

Question 75 pts

What is the new total value of the firm after the repurchase?

Question 85 pts

What is the firm’s new after-tax cost of debt?

Question

What is the firm’s new WACC (assuming that the increase leverage has caused the demanded return on common stock to rise to 23%)?

Question

Which of the following is the most correct interpretation of what occurred in this homework assignment when the capital structure changed?

WACC decreased because more of the firm was funded with debt.

The Cost of Equity increased because because the Cost of Debt increased.

Total risk decreased which resulted in a decrease in WACC. (The higher the risk, the higher the rate of return demanded.)

The Cost of Equity increased because of market trends driving up the price of stock.

WACC increased because risk increased when more debt was issued.

 
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