Price-earnings ratio-what is ratio after it borrows

Assignment Help Financial Management
Reference no: EM131587978

River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $230,000 of debt at an interest rate of 10% and use the proceeds to repurchase 23,000 shares at $10 per share. Profits before interest are expected to be $123,000.

a. What is the ratio of price to expected earnings for River Cruises before it borrows the $230,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Price-earnings ratio  

b. What is the ratio after it borrows? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Price-earnings ratio

Reference no: EM131587978

Questions Cloud

Effective annual interest rate of the loan in mexican pesos : which loan has the lower effective annual interest? rate? The effective annual interest rate of the loan in Mexican pesos is: ?
How many shares are issued to new investor : What are the total post-investment shares? How many shares are issued to new investor? How did you determine this?
What would aftertax cost of debt be : what would the aftertax cost of debt be, based on their cost last year and the 10 percent increase?
Compute the current price of the bonds : Compute the current price of the bonds if the present yield to maturity is.
Price-earnings ratio-what is ratio after it borrows : What is the ratio of price to expected earnings for River Cruises before it borrows the $230,000?
What is sarah realized gain : If the stock of Super Brand is trading at $60.61 at expiration, what is Sarah’s realized gain?
Determine the npv for project-draw a timeline : Determine the NPV for this project. Should Brower build the plant? DRAW A TIMELINE
What happens to expected return on the stock : If Northern Sludge issues an additional $12 million of common stock and uses this money to retire debt, what happens to the expected return on the stock?
Make realistic assumpions about any missing data : Complete Dr. Beeper's federal tax return for 2015. Use form 1040 and Schedule E and form 8582. Make realistic assumpions about any missing data.

Reviews

Write a Review

Financial Management Questions & Answers

  Maturity risk premium is required on TIPs

Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIP) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 0.9%, that no maturity risk premium is..

  Cash from a donor who temporarily restricted its use

The clinic incurred $4,500,000 in general expenses and paid cash for them. The hospital received $1,000,000 in cash from a donor who temporarily restricted its use.

  Make a graph with the change in the interest rate

Make a graph with the change in the interest rate on the horizontal axis and the percentage change in stock prices on the vertical axis.

  Dividends are expected to grow at rate

Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 22 percent for the next three years, with the growth rate falling off to a constant 7 percent thereafter. If the required return is 12 percent, and the company just paid a di..

  The required rate of return decreased

What would happen to the NPV and PI for each project if the required rate of return increased? If the required rate of return decreased?

  What is maximum price per share-newman should pay for grips

Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$3.03 per share and paid cash dividends of ?$1.33 per share. What is the maximum price per share that Newman should pay for..

  Due to number of lawsuits related to toxic wastes

Due to a number of lawsuits related to toxic wastes, a major chemical manufacturer has recently experienced a market revaluation. The firm has a bond issue outstanding 15 years to maturity and a coupon rate of 8 percent, with interest paid semiannual..

  What are some of the ethical issues that can arise

Vendor discounts for early payment are can be attractive for a firm. What are some of the ethical issues that can arise?.?

  Calculate the earning assets to total assets

Calculate the Earning assets to total assets, Interest margin to average earning assets, Loan loss coverage ratio and Equity to total assets for 2011, 2010, and 2009:

  Problem of the coinsurance effects of merging

Suppose firm A and firm B are planning on merging. There are no costs or synergy benefits from the merger. Before the merger firm A has an issue of bonds outstanding. These bonds entitle the holder to a payment of $80 million when the bonds mature ne..

  Excesses of rapid industrialization and urbanization

How did the Progressive era reformers respond to the excesses of rapid industrialization and urbanization? What key areas of reform did they address and were they successful?

  What is the future value of your windfall in three years

You have just received a windfall from an investment made in a friend's business. He will be paying you $10,000 at the end of this year, $20,000 at the end of the following year, and $30,000 at the end of the year after that (three years from today)...

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