User Account

All Pages

Effect on the value of? zelnor''s assets

Assignment Help Finance Basics
Reference no: EM131669518

Zelnor, Inc., is an? all-equity firm with 100 million shares outstanding currently trading for $8.50

per share. Suppose Zelnor decides to grant a total of 10 million new shares to employees as part of a new compensation plan. The firm argues that this new compensation plan will motivate employees and is better than giving salary bonuses because it will not cost the firm anything. Assume perfect capital markets.

a. If the new compensation plan has no effect on the value of? Zelnor's assets, what will be the share price of the stock once this plan is? implemented?

b. What is the cost of this plan for Zelnor? investors? Why is issuing equity costly in this? case?

If the new compensation plan has no effect on the value of? Zelnor's assets, what will be the share price of the stock once this plan is implemented?

If the new compensation plan has no effect on the value of? Zelnor's assets, the new share price will be

?$_____. Round to the nearest? cent.)

b. What is the cost of this plan for Zelnor? investors? Why is issuing equity costly in this? case?

The cost to investors is $______ million. ? (Round to the nearest? million)

Why is issuing equity costly in this? case? ? (Select the best choice? below.)

A. This is a standard example of the effect of dilution on the share price which is always costly.

B. It is not costly because we are not taking into account the benefit of the equity to the employees. Once that is accounted? for, the value of the firm will be the same.

C. It only appears costlylong dash-the value of the firm as a whole is unchanged.

D. It's costly because the shareholder equity is being given away to employees for free.

Reference no: EM131669518

Questions Cloud

Coffee drinking to stock investment : How much will be your annual withdrawal from age 66 to 85 if you switch your coffee drinking to stock investment.
Describe the different mechanisms : Describe the different mechanisms available to a firm for repurchasing shares.
Share price be after this? announcement : Suppose Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares.
Interest tax shield from the new? debt : Absent personal? taxes, what is the value of the interest tax shield from the new? debt?
Effect on the value of? zelnor''s assets : If the new compensation plan has no effect on the value of? Zelnor's assets, what will be the share price of the stock once this plan is? implemented?
After-tax cost of capital for this debt financing : The net proceeds (proceeds after flotation costs) are $980 for each $1,000 bond. The firm's marginal tax rate is 40%. What is the after-tax cost of capital?
What is the firm asset beta : The debt-equity ratio is .47. If you apply the common beta assumptions, what is the firm's asset beta?
What were the reasons for the great migration : What were the reasons for the great migration? What were some of the risks involved for the African Americans who undertook the move?
Dividend growth annual dividends of general electric : Dividend Growth Annual dividends of General Electric (GE) grew from $0.75 in 2001 to $1.12 in 2006. What was the annual growth rate?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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