Stock price be if it changed to the new capital structure

Assignment Help Financial Management
Reference no: EM131628527

Merriweather Building has operating income of $20 million a tax rate of 40% and no debt. It pays out all of its net income as dividends and has zero growth rate the current stock price is $40 per share and it has 2.5 million shares of stock outstanding. If it moves to a capital structure that has 40%devt and 60% equity, its investment bankers believe its weighted average cost of capital would be 10%. What would it's stock price be if it changed to the new capital structure?

Reference no: EM131628527

Questions Cloud

About trends occurring in the health services industry : Which of the following statements about trends occurring in the health services industry is most correct?
Stock today based on discounted dividend model : What is the value of this stock today based on the discounted dividend model?
Describe economies of scale and economies of scope : Explain Growth and Synergy Acquisition strategies, how they differ and how they are similar. Describe Economies of Scale and Economies of Scope.
What type of media would you use for advertising campaign : If you worked for Bernard’s, what type of media would you use for your advertising campaign?
Stock price be if it changed to the new capital structure : What would it's stock price be if it changed to the new capital structure?
Considering a change from its current capital structure : Lydic Enterprises is considering a change from its current capital structure.
The firm pay on each outstanding bond each month : The face value of the bonds is $1,000. How much interest must the firm pay on each outstanding bond each month?
Calculate realized yield for an investor with three-year : Calculate realized yield for an investor with a three-year holding period and a reinvestment rate of 6 percent over the period.
Calculate the net present value for each project : Highland Mining and Minerals Co. is considering the purchase of two gold mines. Calculate the net present value for each project.

Reviews

Write a Review

Financial Management Questions & Answers

  Yield curve is downward sloping

If the yield curve is downward sloping, which of the following statements is correct? (hint: graph the yield curves for a T- bond, a AAA bond, and a B bond)

  Stock split reverse-stock split stock-dividend corporate

Stock Split Reverse, Stock Split Stock, Dividend Corporate, Stock Repurchase, Dividend Payout, or Information content of dividends.

  The project must earn to equal the aftertax salvage value

Allied Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $9.5 million for the next 8 years. Allied Products uses a discount rate of 14 percent for new product launches. If the estimates of rem..

  Current financial statements

You have looked at the current financial statements for Reigle Homes, Co. What is the price per share of the company's stock?

  What is the expected return on the investment with a beta

The expected return on the S&P 500 is 10% and the risk-free rate is 3%. What is the expected return on the investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?

  What is the payment expected by the holders of securities

what is the payment expected by the holders (purchasers) of the securities at the end of the first year if 10% of the mortgages are expected to be prepaid?

  Compare the investment conditions for foreign companies

Selecting articles from this site, compare the investment conditions for foreign companies wishing to invest in the European Union with the conditions for Brazil.

  What would you be willing to pay for this investment

A certain investment will pay $300 in year 4 and $1500 in year 7. If the required rate of return is 6.5%, what would you be willing to pay for this investment?

  Asset management ratios

Asset Management Ratios Corn Products, Corp. ended the year 2008 with an average collection period of 35 days.

  Tax adjustment must be made in determining the cost

A tax adjustment must be made in determining the cost of. For a typical firm with a given capital structure, which of the following is correct?

  What is the federal reserve most important function

What is the Federal Reserve's most important function? How does this function affect the nation’s rate of inflation and employment?

  Describe the entire entrepreneurial process

Create a 10–12-slide PowerPoint presentation that will describe the entire entrepreneurial process from idea inception until pitching to investors. I need some baseline guidance for its creation.

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