?? Financial accounting A company having total assets of $2,350,000 andliabilities of $950,000 needed to raise 1,000,000 topurchase some land for expansion. They could eitherborrow the funds using 20-year bonds or they couldissue 100,000 shares of common stock at the estimatedmarket price of $10 per share. What is the debt/equityratio before any choices are made?

Step 1: Identify the formulas• Total Equity = Total Assets - Total Liabilities• Debt/Equity Ratio =…

Answered: A company having total assets of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.
Solve it correctly please.
Suppose the firm has a value of $169,411.77 when it is all equity financed. Now assume the firm issues $ 52,000 of debt paying interest of 6% per year and uses the proceeds to retire equity. The debt is expected to be permanent. What will be the value of the firm? Enter your answer rounded to two decimal places. Number What will be the value of the equity after the debt issue? Enter your answer rounded to two decimal places. Number
A company needed ghc 1000 to finance its activities. The firm can financed this expenditure either by bonds or equity. Interest rate on bonds is 10%. The company can earn ghc 160 in good years and ghc80 in bad years. Assuming the firm faces equal probability of good and bad years; i What will be the stream of returns on both bonds and equity if the company chooses the following financing options a 100% equity financing b 50% equity financing c 20% equity financing d 0% equity financing ii Estimate the equity risk associated with each option in (i) iii As an investor who wants to purchase a share in the company, which financing option will make you purchase the stock. Why????
Kelly Corporation is considering the issuance of either debt or preferred stock to finance the purchase of a facility costing P1.5 million. The interest rate on the debt is 16 percent. Preferred stock has a dividend rate of 12 percent. The tax rate is 46 percent. REQUIREMENTS: 1. What is the annual interest payment? 2. What is the annual dividend payment? 3. What is the required income before interest and taxes to satisfy the dividend requirement??
A company is all equity financed with 18,000 shares outstanding and each share sells for$22.The company is debating of converting into a 40% debt capital structure, with 6%interest per annum. The cost of capital is currently 10%. Ignore taxes.You are required to answer the following:(a) What is the current market value of the company?(b) What is the market value of debt in the proposed debt capital structure?(c) How many shares must be repurchased in the proposed levered company?(d) What is the cost of equity in the levered company?
Suppose Scott, Inc. is currently unlevered, with 50 shares outstanding. It wants to finance a shopping center, which requires $18000 capital. The firm is considering two financing plans as shown below. Tax rate is 21%. Plan 1: 50% of debt at 16% and 50% Equity at $180/share Plan 2: 100% of Debt at 16% Please calculate the indifference EBIT and EPS.
The Whistling Straits Corporation needs to raise $60 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $21 per share and the company's underwriters charge a spread of 7 percent, how many shares need to be sold? (Do not round intermediate calculations and round your answer to nearest whole number, e.g., 1,234,567.) Number of shares offered 3,133,641
ranger Inc. has done the following projections for its balance sheet: total assets of $85 million, current liabilities of $29 million, long-term liabilities of $43 million. If the firm will require net new financing of $1 million, what is the projected amount of stockholders' equity?
Can i please get help with the practice question, i attached it below. Thank you. I need it soon too
3) As a consultant to KLM Snow Sports Equipment, you have been asked to compute the appropriate discount rate to use to evaluate the purchase of anew warehouse facility. You have determined the market value of the firm's capital structure as follows:Source of Capital Market ValueBonds $600,000Preferred Stock $150,000Common Stock $450,000To finance the purchase, KLM will sell 20‐year bonds, with a 9% coupon rate and semiannual coupons, at the market price of $940. Flotation costs forissuing the bonds are 3 percent of the market price. Preferred stock paying an annual $3 dividend can be sold for $42; the cost of issuing these shares is$3 per share. Common stock for KLM is currently selling for $54 per share. The firm paid a $2.80 dividend last year and expects dividends to continuegrowing at a rate of 5 percent per year. Flotation costs for issuing new common stock will be 6 percent of the market price. The firm’s dividendscurrently equal the net income so there is no internal equity…
A proposed recapitalization plan for Focus Corporation would change its current all-equity capital structure to leveraged capital structure. The proposal is for Focus to sell $47,000,000 worth of long-term debt at an interest rate of 6.5% and then repurchase as many shares as possible at a price of $28 per share. Focus currently has 4,800,000 shares outstanding and expects EBIT to be $27,000,000per year in perpetuity. Ignoring taxes, calculate the following: a. The number of shares outstanding, the per-share price, and the debt-to-equity ratio for Focus if it adopts the proposed recapitalization. b. The earnings per share (EPS) and the return on equity (ROE) for Focus under the current and proposed capital structures. c. The EBIT where EPS is the same for both capital structures. d. The EBIT where EPS is zero for both capital structures a) The number of shares outstanding for Focus if adopts the proposed recapitalization is _3,121,429_ shares. (round to the nearest…

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