What would be the company new stock price

Assignment Help Financial Accounting
Reference no: EM132955161

Question - Blue Sky Berhad currently has RM200,000 debt outstanding carrying a coupon rate of 6 %. Its earnings before interest and taxes (EBIT) are RM100,000, and it is a zero-growth company. The company's cost of equity is 10 %, and its tax rate is 27%. The company has 10,000 shares of common stock outstanding. The dividend payout ratio is 100%.

Blue Sky Berhad is considering recalling the 6 % debt by issuing RM400,000 new 7 % debt. The new funds would be used to replace the old debt and to repurchase stock at the existing price. It is estimated that the increase in riskiness resulting from the leverage increase would cause the required rate of return on equity to increase to 11 %. If this plan is carried out, what would be the company's new stock price?

Reference no: EM132955161

Questions Cloud

Show the journal entry of each event related to the machine : Assuming cost model and straight line method is used to account for the machine, show the journal entry of each event related to the machine.
What the current debt prior to borrowing the deposit : You have been approached by a customer for assistance to purchase an investment property. What the current debt prior to borrowing the deposit
Show the journal entry of each events : Assuming AISY use revaluation model and the factory is depreciated for 40 years using straight line method, show the journal entry of each events
Find what will be firm quick ratio after nelson has raised : The Nelson Company has $1,430,000 in current assets and $550,What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds?
What would be the company new stock price : Blue Sky Berhad currently has RM200,000 debt outstanding carrying a coupon rate of 6 %. What would be the company new stock price
Find what is stock expected price three years from today : What is the stock's expected price 3 years from today? Current price per share is $12.50. Dividend is projected to increase at constant rate of 5.5% per year.
What is the corporation foreign tax credit : The tax on the $600,000 of worldwide income is $200,000. What is the corporation's foreign tax credit
How is culture a factor : What are some of the challenges to doing CS/CSR? How is culture a factor? How is this relevant to the current situation with COVID-19?
Determine carl federal tax : Determine Carl's Federal tax for 202X. The cost of the annuity was $46800 and Carl was expected to receive a total of 260 monthly payments of $450

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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