What is the company target debt to asset ratio

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Reference no: EM131905364

You currently own 1,300 shares of a Company. The Company is currently an all equity that has 300,000 shares of stock outstanding at a market price of $35 a share. The company's earnings before interest and taxes are $2,100,000.

The Company recently decided to issue $2,100,000 of debt at 5 percent interest. This debt will be used to repurchase shares of stock. Ignore taxes and answer the following two questions:

Part A: What is the Company's target debt to asset ratio? %

Part B: How many shares of the Company's stock must you sell to undo the leverage? Assume that you can loan out those funds at 5 percent interest.

Reference no: EM131905364

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