Dell Ltd has no debt outstanding, and currently has a market value

Dell Ltd has no debt outstanding, and currently has a market value of $125 million. There are three possible scenarios for the next year:

Economic condition	Earnings before interest and tax (EBIT)
Strong	$15 million
Normal	$10 million
Weak	$5 million

 

The company is considering issuing $50m of debt with 5% interest rate. Dell will use the money raised through the debt issuance to repurchase the ordinary shares. There are currently 10 million shares outstanding.

1. Assume no tax, what are the possible outcomes for earnings per share (EPS) next year before the debt is issued?
2. Assume Dell has issued the debt and repurchased the shares, calculate (a) again. What do you observe?

There is an opportunity to expand the existing business by purchasing a new machinery for production

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Assume you want to borrow $6,000 for a period of four years

Part A Assume you want to borrow $6,000 for a period of four years. You have two choices. ANZ bank is offering to lend you the amount at 7.25% p.a.. You can also borrow from Westpac bank and will have to repay a total of $8,162.93 at the end of four years. Which bank should you go with, and what is the interest rate if you borrow from Westpac bank?   Part B Wilson Ltd has borrowed from a bank to invest in a project. The loan requires a payment of $20,000 every year for five years. The lender quoted Wilson Ltd a rate of 8.50% p.a.. How much did the bank lend to Wilson Ltd?   Part C Sarah is…

FINM7409 – Financial Management for Decision Makers

Question 1 Part A Assume you want to borrow $6,000 for a period of four years. You have two choices. ANZ bank is offering to lend you the amount at 7.25% p.a.. You can also borrow from Westpac bank and will have to repay a total of $8,162.93 at the end of four years. Which bank should you go with, and what is the interest rate if you borrow from Westpac bank?   Part B Wilson Ltd has borrowed from a bank to invest in a project. The loan requires a payment of $20,000 every year for five years. The lender quoted Wilson Ltd a rate of 8.50% p.a.. How much did the bank lend to Wilson Ltd?   Part C…

Fiona Sporty uses a purchases journal, a cash payments journal

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Peakhurst Limited had the following trial balance at 1 January 2016

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Cotton On Ltd. currently has the following capital structure

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At 30 June 2019, Beta Ltd had the following deferred tax balances

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Hi Tech Products manufactures three (3) types of CD players

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