It is January 2nd. Senior management of Digby meets to determine their investment plan for theyear. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stockplus a new bond issue. The CFO happily notes this will raise their Leverage (-assets/equity) to anew target of 2.7. Assume the stock can be issued at yesterday's stock price ($37.86). Which of thefollowing statements are true? Check all that apply.Select: 3Digby will issue stock totaling $1,893,000Total investment for Digby will be $5,111,100The Digby bond issue will be $3,218,1004The Digby Working Capital will be unchanged at $16,095Total Assets will rise to $226,004,000Long term debt will increase from $83,016,908 to $84,909,908Save Answer

In the event that a stock company requires additional capital, the company has the option of selling…

Answered: It is January 2nd. Senior management of…

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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2. An analyst for Acme, R. Runner, has recommended that Peter the Anteater purchase shares in a private firm (a firm that is not traded on any exchange) called Dynamite Corp. Dynamite has 30% debt and 70% equity. R. Runner believes that Dynamite will generate a return of 10% over the next year. Since Y. Lee is new to the job, he decides to do a little research on his own. He finds a company, Explosions Unlimited, that has very similar business as Dynamite. Explosions has an equity beta of 1.05 and is composed of 40% debt and 60% equity. Should Peter the Anteater buy the stock? The expected return on the market is 12% and the expected risk-free rate is 5%.
Please proper steps correctly all parts or skip pls. All parts necessary or skip.
Vinubhai
Cabaret Co. has issued stock options (warrants) to its employees, some of which will come to maturity this year. At fiscal year end the firm expects the options to be exercised on 48,750 shares at the price of $25.50 per share. Currently, the firm has 1,280,400 shares outstanding, will earn $2,800,000 in net income, and has a market share price of $32.00. After the stock options are exercised, what will the be the effect of Earnings Per Share (EPS)?
A company is going public at $19 and will use the ticker XYZ. The underwriters will charge a 7 percent spread. The company is issuing 18 million shares, and insiders will continue to hold an additional 36 million shares that will not be part of the IPO. The company will also pay $1.5 million of audit fees, $3 million of legal fees, and $300,000 of printing fees. The stock closes the first day at $21. Answer the following questions: a. At the end of the first day, what is the market capitalization of the company? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place. $ million b. What are the total costs of the offering? Include underpricing in this calculation. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Do not round intermediate calculations. Round your answer to one decimal place. $…
Assume that an investor expects 18X their investment into a company. Assume the post money exit valuation of a company is going to be $3.6 Million. Assume that the investor's investment into the company is going to be $130,000. Assume the company will likely have 14 employees at the point of the liquidation event. According to the investor's expectations, at the point when the investor invests their money, what proportion of the company will the investor own? O a. 3.6% O b. 50.5% Oc. 35% O d. 65% 18%
John Tye has just been hired as the new corporate finance analyst at I-Ell Enterprises and has received his first assignment. John is to take the $25 million in cash received from a recent divestiture and use part of these proceeds to retire an outstanding $10 million bond issue and the remainder to repurchase common stock. However, the bond issue cannot be retired for another two years. If John can place the funds necessary to retire this $10 million debt into an account earning 6 percent compounded monthly,how much of the $25 million remains to repurchase stock?
You are given the following information about Aisha Enterprises. The company would like to raise capital through shares only. It has five alternative operational periods in which to raise funds. The company has 25,000 ordinary shares at $10 per share. It has 2500 preference shares of $ 100 each. The dividend on preference shares is 8%. The tax rate is 25 % and the interest rate is 15%. The company would like to raise $2 million. You are required to complete an EBIT/EPS Analysis for the company. A B C D E EBIT 400,000 600,000 700,000 800,000 900,000
The board of directors of Pharoah Health Supply Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $3,000,000, 7%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock that is selling for $30 per share on the open market. Pharoah currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $570,000 if the new factory equipment is purchased. Prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering. (Round earnings per share to 2 decimal places, e.g. 5.25.) Plan #1 Issue Bonds $ $ Plan #2 Issue Stock
sano
Whim's auto has $4,300,000 in retained earnings after which the company will have to issue new shares. Equity consists of 40 perecent in the company's capital structure. After how much additional funding will the firm have to issue new shares?
You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance. a. What is the initial equity in your account? b. Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month: Month Microtech Inc. King Tools Corp. October $51 $48 November 39 62 December 37 40

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