Calculate the value of the equity after restructuring

Assignment Help Accounting Basics
Reference no: EM132731360

Question - The Dance Studio is currently an all-equity firm that has 22,000 shares of stock outstanding with a market price of $25 a share. The current cost of equity is 12 percent. The company tax rate is 30 percent. The firm would like to restructure its capital by adding $225,000 of debt with a coupon rate of 6.25 percent and repurchase its 9000 shares. The debt will sell at par. Assuming MM1963 world with tax, calculate the value of the equity after restructuring?

a. $325,000

b. $395,000

c. $550,000

d. $775,000

e. None of the above

Reference no: EM132731360

Questions Cloud

Find the value of the stream of rent payments : The first year's rent is expected to be $10,500, rent is expected to increase 3% each year. The discount rate is 10%. Find value of the stream of rent payments
What cumulative or cross-cutting cleavages exist : What cumulative or cross-cutting cleavages exist? Have issues of group/coalition membership and/or identity played roles in initiating the violence? If so, how?
What is the annual percentage rate : If the effective annual rate of interest is known to be 19.56% on a debt that has monthly payments, what is the annual percentage rate
Compute the equivalent production using average method : Work in process end: 1/2 is 4/5 completed and the balance is 1/2 completed. Compute the equivalent production using FIFO and Average Method
Calculate the value of the equity after restructuring : The debt will sell at par. Assuming MM1963 world with tax, calculate the value of the equity after restructuring
What respect to the transfers : Serve as manager of ABC for one year; in return Matt receives 50 shares of ABC. The value of Matt's services is $120,000. With respect to the transfers
Describe efforts to prevent cybercrime in business : List two practices that individuals should adopt in their efforts to prevent cybercrime in business or educational environments. Make sure that you properly.
What is the standard deviation of demand during lead time : H & K Electronic Warehouse sells a 12-pack of AAA batteries, and this is a very popular item. What is the standard deviation of demand during lead time
How the variables specified in hypothesis could be displayed : How the variables specified in hypothesis 1 and 2 could be displayed in one diagram, which illustrates the independent and dependent variables

Reviews

Write a Review

Accounting Basics Questions & Answers

  Dr. delapa took an inventory of the dental

Dr. DeLapa took an inventory of the dental supplies purchased in transaction The inventory totaled  the remainder having been consumed in providing dental care.

  Long term obligations usually are reclassified and reported

Long-term obligations usually are reclassified and reported as current liabilities when they become payable within the upcoming year (or operating cycle, if longer than a year).

  What is the expected return of the portfolio of investments

Problem - What is the expected return of the following portfolio of investments, r^p

  Standards in the ima statement of ethical practice

List and describe the four standards in the IMA's Statement of Ethical Practice. As part of your answer, be sure to provide an example of an action that violates the standard.

  At what amount per unit should inventory item be reported

At what amount per unit should this inventory item be reported, applying lower-of-cost-or-market

  Overhead costs wages and salaries 159000 other expenses

overhead costs wages and salaries 159000 other expenses 62000 total 221000 distribution of resource consumption

  Prepare a contribution margin format income statement

prepare a contribution margin format income statement answer what-if questions shown here is an income statement in the

  How much cash dividend was paid to preferred shareholders

Out of Africa, a multi-national corporation had a very successful year. How much of the cash dividend was paid to the PREFERRED shareholders

  What is the amount of h allowable capital loss

H sold shares of a public company worth $60,000. The corporation continues to own the shares. What is the amount of H's allowable capital loss?

  What should be Linda basis in the S corporation stock

Linda received a distribution of $20,000 during the year. What should be Linda's basis in the S corporation stock at December 31, 2018

  Explain the effect of internal audit outsourcing

According to survey conducted by The Institute of Internal Auditors (IIA) in 2016, it was found that majority of publicly listed companies fully outsourced.

  What is the depreciation

Norraine Company uses the composite method of depreciation based on a composite rate of 25%. What is the depreciation for 2010

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd