Condensed Statement of Financial Position for Pan and Sol Corporations at December 31, 2019, are as follows (In thousands): PAN SOL Current assets 260 120 "Non-current assets 1,140 880 Total assets 1,400 1,000 Current liabilities 100 120 Capital stock, P20 par Additional paid-in capital Reatined earnings 1,000 400 100 280 200 200 Total equities 1,400 1,000 On January 2, 2020, Pan issued 60,000 shares of its stock with a market value of P20 per share for the assets and liabilties of Sol Corporation. Sol is dissoved. The book values reflect fair values, except a noncurrent asset of Pan, which have a fair value of P800,000, and the current assets of Sol, which have a net realizable value of P200,000. Pan pays the follwing expenses in connection with the business combination: Costs of registering and issuing securities issued 30,000

Condensed Statement of Financial Position for Pan and Sol Corporations at December 31, 2019, are as follows (In thousands): PAN SOL Current assets 260 120 "Non-current assets 1,140 880 Total assets 1,400 1,000 Current liabilities 100 120 Capital stock, P20 par Additional paid-in capital Reatined earnings 1,000 400 100 280 200 200 Total equities 1,400 1,000 On January 2, 2020, Pan issued 60,000 shares of its stock with a market value of P20 per share for the assets and liabilties of Sol Corporation. Sol is dissoved. The book values reflect fair values, except a noncurrent asset of Pan, which have a fair value of P800,000, and the current assets of Sol, which have a net realizable value of P200,000. Pan pays the follwing expenses in connection with the business combination: Costs of registering and issuing securities issued 30,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Hi Expert,I got this theoretical question in Corporate Finance, and i was hoping for a bit of help :) Explain what happens to the firm’s cost of equity, cost of debt, and cost of capital when the firm increases the amount of debt in its capital structure. Assume all Modigliani and Miller assumptions hold and that there are no taxes. Best,Christian
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