Homework Answers
Option a is correct.
Borrow 20000 at 5% and purchase 200 shares whose value =(200*100 =
20,000)
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v Question Completion Status: QUESTION 2 ABC Inc. is 100% equity financed. The stock price is...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For each of the questions that follow, assume no...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For...
5. Bryan invested in Bryco stock when the firm was financed solely with equity. The firm...
5. Bryan invested in Bryco stock when the firm was financed solely with equity. The firm now has a debt-equity ratio of .3. To maintain the same level of leverage he originally had, Bryan needs to: discount rate which the firm should apply to all of the projects it undertakes. [Hint: Bryan could do a homemade leverage] A. borrow some money and purchase additional shares of Bryco stock. B. maintain his current position in Bryco stock. C. Sell some shares...
Washington Beltway is consulting firm financed entirely by common stock and has 15M shares outstanding with...
Washington Beltway is consulting firm financed entirely by common stock and has 15M shares outstanding with a price of $2 per share. It earnings per share are $0.20 and it has a required return on equity (unlevered) of 10%. It announces that it intends to issue $10M of debt and use the proceeds to buy back common stock at market prices. a. How many shares should the company be able to buy back with the $10m proceeds from the debt...
6- Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000...
6- Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value? (Remember that par value of a bond is $1,000).
Company ABC has 10,000 shares outstanding and the stock price is $100. The company is expected...
Company ABC has 10,000 shares outstanding and the stock price is $100. The company is expected to pay a dividend of $10 per share next year and thereafter the dividend is expected to grow indefinitely by 6% a year. The company now makes an announcement: It will repurchase shares next year instead of issuing cash dividends. But from year 2 on the payout policy stays the same with cash dividends. (Please check my work A - C, and solve for...
OQ Inc. is an all equity financed company in the country which does not have any...
OQ Inc. is an all equity financed company in the country which does not have any corporate taxes. The company has an EBIT of $2 million and EBIT is expected to grow at 6% per year forever. The cost of equity for OQ Inc. is 18%. Currently, the company has 625,000 shares of common stock outstanding. a. Calculate the value of the firm with its all equity financed capital structure. b. Suppose the company is thinking about changing its capital...
OQ Inc. is an all equity financed company in the country which does not have any...
OQ Inc. is an all equity financed company in the country which does not have any corporate taxes. The company has an EBIT of $2 million and EBIT is expected to grow at 6% per year forever. The cost of equity for OQ Inc. is 18%. Currently, the company has 625,000 shares of common stock outstanding. a. Calculate the value of the firm with its all equity financed capital structure. b. Suppose the company is thinking about changing its capital...
Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For each of the questions that follow, assume no...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For...
Use the following information to answer the questions. Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has $25,000 excess cash. It is considering using this excess cash to pay it out as dividend or use it to repurchase $25,000 of its own stock. The firm has other assets worth $475,000 (at market value). For...
6- Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value? (Remember that par value of a bond is $1,000).
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