I need help with problem C i and ii. Thank you The Hercules Company...
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I need help with problem C i and ii. Thank you
The Hercules Company Please consider the following data for the Hercules Company: Assets: Equity: Sales EBIT: Profit (bt) Profit (at) $3 billion $2 billion $1.5 billion $300 million $200 million $150 million Payout ratios: 30% Number of common stock shares outstanding is: 50 million shares a) How much interest is Hercules paying on this debt? S100 million 10% b) What is Hercules Company's current ROE & ROI (return on investmentp, t or return on assets)? 7.5 % 5% Ro Asses c qu c) i) If Hercules were to float (sell) $500 million in bonds and use the proceeds to buy back 12.5 million common shares back, what would be the new ROE & ROI? Hint: What is the implied book/market price for a share of Hercules common stock? (Assume all else remains unchanged.) 7.5% 3.75% ngcd oan.so%h ii) If Hercules were to float (sell) $500 million in bonds and use the proceeds to buy new plant and equipment that would cause sales to increase to $2.5 billion with an increase in COGS of $800 million, what would be the new ROE & ROI? (Assume the tax rate & the interest rate, on debt remains unchanged.) 13.125% 75% d) What are the sustainable growth rates for part b),c i) and c i)? b) 5.25% c i) 5.25% c ii) 9.1875%
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