Construct the company’s market value balance sheet before the announcement of the debt issue. What is the price per share of the firm’s equity?

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Effect of Debt Issuance on Stock Valuation

Purpose of Assignment

The purpose of this assignment is to demonstrate to students how the issuance of debt to purchase outstanding common stock could affect the value of the company’s equity and redefine the capital structure. The problem will also allow students to explore the effect of corporate taxes through debt financing.

Assignment Steps

Resources: Corporate Finance

Scenario: Hightower, Inc. plans to announce it will issue $2.0 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 5%. Hightower, Inc. is currently an all-equity company worth $7.5 million with 400,000 shares of common stock outstanding. After the sale of the bonds, the company will maintain the new capital structure indefinitely. The company currently generates annual pretax earnings of $1.5 million. This level of earnings is expected to remain constant in perpetuity. The tax rate is 35%.

Prepare a 1,050-word memo advising the management of Hightower, Inc. on the financial impact, including the following:

  • What is the expected return on the company’s equity before the announcement of the debt issue?
  • Construct the company’s market value balance sheet before the announcement of the debt issue. What is the price per share of the firm’s equity?
  • Construct the company’s market value balance sheet immediately after the announcement of the debt issue.
  • What is the company’s stock price per share immediately after the repurchase announcement?
  • How many shares will the company repurchase as a result of the debt issue? How many shares of common stock will remain after the repurchase?
  • What is the required return on the company’s equity after the restructuring?
  • Discuss the advantages and disadvantages of debt financing over equity financing.

Show all calculations in excel .

Format your paper consistent with APA guidelines.

In a concise paragraph, summarize the situation. Clearly state the law the employee believes your organization is violating, and why.

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Unit 1 Assignment – Policy and LawSubmit AssignmentThis week, we learned about the various laws that apply to human resources. Your assignment will challenge you to put that knowledge into action, by constructing a scenario that exemplifies one of the laws presented in your readings this week.

Instructions:

  • Construct a scenario involving an employee who is contesting an organization’s policy or decision. This could be a policy they feel is discriminatory, unfair, or a staffing or management decision – but you are not limited to only these options.
  • You will assume the role of the health care manager in this scenario, and will listen and respond to the employee’s concerns.
    • In a concise paragraph, summarize the situation. Clearly state the law the employee believes your organization is violating, and why.
    • In a second paragraph, provide your analysis of the concern raised by the employee. Your response should include relevant sources, as in-text citations. You will need to confirm or deny a violation.
    • In a third paragraph, state the action steps you and the employee will take. If a violation was present, explain how you will rectify the situation. If no violation was present, explain how you will notify the employee. If other parties should also be notified, or if an edit to a policy is needed, state that as well.
  • This documentation will be placed in the employee’s file. Your writing should be professional, unbiased, and reflect a scholarly tone.

Discuss the basic and relevant background of your topic. You must conclude with the thesis statement that you will be attempting to support/refute in the rest of the paper. 

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The Paper Itself!

Layout: The paper must be word-processed and must use headings such as in this guide. Failure to use headings for sections and failure to organize material under those headings will result in loss of marks   1. Introduction: Not more than 750 words. In the introduction, you should provide the necessary background on your chosen topic. Discuss the basic and relevant background of your topic. You must conclude with the thesis statement that you will be attempting to support/refute in the rest of the paper.

2. What does the ‘science or data’ say that supports your thesis? In this section, you will examine the literature and use scientific and/or geographic knowledge and principles that will support your thesis. In order to do this, you will need to find and discuss five original peer-reviewed research papers published in scientific journals. You will need to report the data that supports your thesis statement and discuss how each of these papers supports your thesis statement (approximately 1500 words).

3. What does the same ‘science or data’ say that refutes your thesis? In this section, you will examine the same five papers that you used to support your thesis and discuss and interpret their findings such that they refute, disprove or throw into doubt your original thesis statement (approximately 1500 words).

4. Conclusions: Summarize your findings in 500 words or less. Restate your original thesis statement give a final interpretation about its veracity based on what you have written throughout the paper. Length of the paper should be about 4,000 words, not including references, tables and figures. You are encouraged to use figures and tables that will assist in supporting your two arguments. Make sure they are clear, neat and have a proper legend, attribution, and fully informative caption.

5. References: All facts and data must be referenced by author and date (see below). The references should be typed on a separate page(s) and include the following: Authors. Date of article. Full title of article or book. Journal title in full, Volume number; Page numbers (Year of publication for books). References to books should include the editors’ names (if any) as well as the chapter authors (if any), publisher, place (city, state, country) and date of publication. This should be done consistently. You should have no need for footnotes.

Discuss at least one article or website that you researched on these topics. Provide a thorough summary of the article or web site, describing how the software is used.

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Materials Requirements Planning (MRP) has led to Enterprise Resource Planning (ERP). ERP software allows companies to automate and integrate processes and to share a common database while producing information in real time.

The objective of ERP is to coordinate and integrate a firms entire business operations, including supply chain management, product life cycles and customer relationship management (CRM). CRM is designed to help analyze sales, target the most profitable customers and manage the sales force. In addition to customer relationship management, ERP software also helps firms to manage supply chains and product life cycles.

Use the Internet to research one or more articles on the topic of ERP software. Your article(s) must address how customer relationship management, supply chain management and product life cycle pertains to ERP software. Write a 1-3 page report that addresses the following information:

Discuss at least one article or website that you researched on these topics. Provide a thorough summary of the article or web site, describing how the software is used.

Explain how this software helps to analyze customer relationship management, supply chain management and product life cycle management.

ProvideOne (1) example of an industry or firm that uses or perhaps could use this software.

Describe any advantages or disadvantages to using the software.

Include your recommendations and conclusions.

Support your recommendations and conclusions with research. Cite your sources using APA format.