Assume LastQ Inc. has no cash on hand, but wants to take on project that adds $30 million in market value to the firm's assets, and has an NPV of $20 million. The project requires an initial investment of $10 million. LastQ Inc. wants to maintain its 50% Debt to Value Ratio. How much debt should LastQ issue, and how much should they pay stockholders in dividends? Issue $30 million in debt, pay $5 million to shareholders Issue $15 million in debt, pay $5 million to shareholders Issue $10 million in debt, pay $20 million to shareholders Issue $20 million in debt, pay $8 million to shareholders
Assume LastQ Inc. has no cash on hand, but wants to take on project that adds $30 million in market value to the firm's assets, and has an NPV of $20 million. The project requires an initial investment of $10 million. LastQ Inc. wants to maintain its 50% Debt to Value Ratio. How much debt should LastQ issue, and how much should they pay stockholders in dividends? Issue $30 million in debt, pay $5 million to shareholders Issue $15 million in debt, pay $5 million to shareholders Issue $10 million in debt, pay $20 million to shareholders Issue $20 million in debt, pay $8 million to shareholders
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please show all equations and work as needed. Make the correct answer clear. If possible, please type work so it can be copied. Thank you.
Transcribed Image Text:Assume LastQ Inc. has no cash on hand, but
wants to take on
project that adds $30 million
in market value to the firm's assets, and has an
NPV of $20 million. The project requires an initial
investment of $10 million. LastQ Inc. wants to
maintain its 50% Debt to Value Ratio. How much
debt should LastQ issue, and how much should
they pay stockholders in dividends?
Issue $30 million in debt, pay $5 million to
shareholders
Issue $15 million in debt, pay $5 million to
shareholders
Issue $10 million in debt, pay $20 million to
shareholders
Issue $20 million in debt, pay $8 million to
shareholders
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