FINANCIAL MARKETS+INST.-(LL)W/ACCESS
FINANCIAL MARKETS+INST.-(LL)W/ACCESS
7th Edition
ISBN: 9781265567880
Author: SAUNDERS
Publisher: MCG CUSTOM
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Chapter 19, Problem 1Q
Summary Introduction

To discuss: Credit risk and the financial institution that are more subject for this type of risk.

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Answer question using the Modigliani-Miller framework Ordinary Craft Inc.(OC) is currently an unlevered firm with 450,000 shares ofstock outstanding, with a market price of $15 a share. The company has earningsbefore interest and taxes of $314,000. OC met with its bankers, Smartly-SolventIncorporated (SS), and agreed to borrow $825,000, at 5 percent.You are an ardent investor who currently owns 20,000 shares of OC’s stock. Ifyou seek to un-lever your position, how many shares of OC’s stock will youcontinue to own, if you can loan out funds at 5 percent interest? Ignore taxesin your deliberations. Kindly show all workings and formulae used.  All computations must be done and shown in detail. Report numericalresults up to 4 places after the decimal.  also use the unit link to help  file:///C:/Users/rafan/Downloads/MGMT3048_Unit_1-R.pdf
Question 2aa   Ordinary Craft Inc.(OC) is currently an unlevered firm with 450,000 shares ofstock outstanding, with a market price of $15 a share. The company has earningsbefore interest and taxes of $314,000. OC met with its bankers, Smartly-SolventIncorporated (SS), and agreed to borrow $825,000, at 5 percent.You are an ardent investor who currently owns 20,000 shares of OC’s stock. Ifyou seek to un-lever your position, how many shares of OC’s stock will youcontinue to own, if you can loan out funds at 5 percent interest? Ignore taxesin your deliberations. Kindly show all workings and formulae used. All computations must be done and shown in detail. Report numericalresults up to 4 places after the decimal.
Capital Introduced:The owner brings in $50,000 as additional capital in cash. What journal entry should be passed?i need help co
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