Buffalo National Corp. (BNC) is currently an all-equity firm worth $320 million with 50 million common shares outstanding. BNC plans to announce that it will issue $120 million of perpetual debt (i. e., bonds) in order to buy back shares. BNC currently generates annual pretax earnings (EBT) of $80 million, and this level of earnings is expected to remain constant (i. e., EBIT will be $80 million) in perpetuity after the debt issuance and capital restructuring. The bonds will sell at par with an 8% annual coupon rate. BNC’s tax rate is 35%. BNC will maintain the new capital structure indefinitely. There is no financial distress cost, other agency cost, or personal income tax. Required:
a. In the market-value balance sheet of BNC before announcing the debt issuance, what is the market value of equity?
b. What is the stock price of unlevered BNC?
c. What is the expected return on equity before the announcement of the debt issuance (i. e., the cost of unlevered equity)?

The balance sheet contains the following major sections: current assets long-term investments property, plant, and equipment intangible assets other assets current liabilities long-term liabilities contributed capital retained earnings accumulated other comprehensive income required: the following is a list of accounts. using the letters a through j, indicate in which section of the balance sheet each of the accounts would be classified. if an account does not belong under one of the sections listed, select "not under any of the choices" from the classification drop down box. for all accounts, indicate if the account is a contra account or an account that would normally be deducted on the balance sheet by selecting "yes" from the second drop down box, otherwise select "no". account classification contra or deducted (yes/no) 1. cash 2. bonds payable (due in 8 years) 3. machinery 4. deficit 5. unexpired insurance 6. franchise (net) 7. fund to retire preferred stock 8. current portion of mortgage payable 9. accumulated depreciation 10. copyrights 11. investment in held-to-maturity bonds 12. allowance for doubtful accounts 13. notes receivable (due in 3 years) 14. property taxes payable 15. deferred taxes payable 16. additional paid-in capital on preferred stock 17. premium on bonds payable (due in 8 years) 18. work in process 19. common stock, $1 par 20. land 21. treasury stock (at cost) 22. unrealized increase in value of available-for-sale securities

Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms? a. unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. b. new entrants are embedded in an innovation ecosystem, while incumbent firms are not. c. unlike incumbent firms, new entrants do not have formal organizational structures and processes. d. incumbent firms do not have the advantages of network effects that new entrants have.

Digitalhealth electronics inc. is a company that builds diagnostic devices. it was the first company to develop a compact mri scanner by reconfiguring the components of the mri technology. this smaller and user-friendly version of the huge mri scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. which of the following types of innovations does this scenario best illustrate? a. disruptive innovation b. incremental innovation c. radical innovation d. architectural innovation