Find equity after the change in capital structure

Assignment Help Finance Basics
Reference no: EM132731662

Now that your firm has matured, you are considering adding debt to your capital structure for the first time. Your all-equity firm has a market value of $20 million and you are considering issuing $2 million in debt with an interest rate of 7% and using it to repurchase shares. You pay a corporate tax rate of 21%. Assume taxes are the only imperfection and the debt is expected to be permanent

What will be the value of the remaining equity after the change in capital structure?

Reference no: EM132731662

Questions Cloud

Calculate the expected price of stock : If Seattle Super Tonics Inc.'s expected return on equity is 9%, calculate the expected price of their stock at the beginning of 2020.
After-tax weighted average cost of capital : The corporate tax rate is 21%, the expected return on the market is 10%, and the risk free rate is 3%. What is their after-tax weighted average cost of capital?
Finding the estimate of the wacc : If your overall company WACC is 11.7% and the computer sales division represents 40% of the value of your firm, what is an estimate of the WACC
Discuss the components of your treatment plan : For this assignment, you will submit additional components of your treatment plan based on the case study you selected. You can view the case studies in the.
Find equity after the change in capital structure : What will be the value of the remaining equity after the change in capital structure?
Return on total assets-meryl corporation : The Meryl Corporation's common stock currently is selling at $100 per share, which represents a P/E ratio of 10. If the firm has 100 shares of common stock outs
Address it and cybersecurity concepts : Prepare briefing package with approval drafts of the three IT related policies for the Manager's Deskbook - address IT and cybersecurity concepts using standard
Should bellingham packaging purchase the machine : Should Bellingham Packaging purchase the machine? Be quantitatively specific with your answer
Discuss the advantages of having articles : In a 100-150 word paragraph, discuss why using research studies from peer reviewed journals is important to the development of knowledge in social work.

Reviews

Write a Review

Finance Basics Questions & Answers

  Results of significance test for the null hypothesis

A 95% confidence interval for the diffrence between two means is reported as (-2.8, 1.3) what can you conclude about the results of significance test.

  What interest rate are you charging your friend

(Solving for r in compound interest) You lend a friend $10,000, for which your friend will repay you $27,027 at the end of 5 years.

  The payoff to a swap where the investor receives fixed and

the payoff to a swap where the investor receives fixed and pays floating can be replicated by all of the following

  Firm weighted average cost of capital-abc radars

The U.S. Treasury bill is yielding 7 percent and the return S & P is 13 percent. The corporate tax rate is 38 percent.

  United states helped stabilize exchange rates

On June 23, 1997, Japanese Prime Minister Ryutaro Hashimoto spooked Wall Street. At a Columbia University luncheon, he appeared to warn that the Japanese might sell U.S. Treasury bills unless the United States helped stabilize exchange rates. The ..

  Compound and simple interest-pv-annuities

Illustrate compound interest formulas, using them to find future values and present values of the dollar; describe annuities and find out the future value or present value of annuity

  Determine the annual financing cost

Determine the annual financing cost of a 1-year (365 day), $10,000 discounted bank loan at a stated annual interest rate of 9.5 percent. Assume that no compensating balance is required.

  Maintain a positive operating ration

What is the minimum yield on investments required in order to maintain a positive operating ration? (Lg 15-6)

  Established by the taft-hartley act

Summarize the six unfair labor practices by unions as established by the Taft-Hartley Act.

  What is a collaboration system

What is a collaboration system? Speak to why different collaboration may be needed for different corporate cultures

  Write to the newspaper defending the central bank

Read a story in the newspaper blaming the central bank for pushing the economy into recession. - Write to the newspaper defending the central bank, what argument would you make?

  It is known that 60 of mice inoculated with a serum are

it is known that 60 of mice inoculated with a serum are protected from a certain disease. if 5 mice are inoculated find

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