Which of the following is/are true regarding the financing of a charitable organization?
a. may obtain some or all of its financing from donations (contributions)
b. does not issue common stock or other forms of shareholders' equity
c. does not have retained earnings
d. all of the above are true
e. none of the above are true
D
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Indicate whether the statement is true or false
Omnicorp is all equity financed and generates perpetual annual EBIT of $500. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year
Omnicorp has 1,000 shares outstanding which trade for $3.125. The stockholders of Omnicorp require a return of 8%. Omnicorp is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 2%. Assume that the tax rate is 50%. What price does Omnicorp have to offer for repurchased shares such that the repurchase price is equal to the price that prevails after the repurchase is complete? A) $3.125 B) $3.472 C) $3.906 D) $4.34 E) $4.13