Change in capital structure

Assignment Help Business Management
Reference no: EM131104930

The common stock and debt of Northern Sludge are valued at $62 million and $38 million, respectively. Investors currently require a return of 16.8% on the common stock and 7.2% on the debt. If Northern Sludge issues an additional $21 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes.

New Return on Equity?

 

Reference no: EM131104930

Questions Cloud

Is a flexible budget always better : Flexible budgets provide different information than static budgets. Discuss some of these differences. Is a flexible budget always better? Are there times when you'd recommend using a static budget over a flexible budget?
Started production of its new microchip : The Pentel Microchip Company has started production of its new microchip. The first phase in this production is the wafer fabrication process. Because of the great difficulty in fabricating acceptable wafers, many of these tiny wafers must be reje..
Original acquisition of ownership : How does one effectively differentiate that a particular scenario deals explicitly with derivative or original acquisition of ownership?
Why restriction is necessary for recursive descent parsing : The second restriction is that the grammar must not require more than one token look ahead. Give an example of a production that does not have this property. Explain why this restriction is necessary for recursive descent parsing
Change in capital structure : If Northern Sludge issues an additional $21 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt and that th..
Compute the cost of the ending inventory under average cost : Compute the cost of the ending inventory under average cost. Compute the cost of the ending inventory under LIFO. Compute the cost of the ending inventory under FIFO.
Are the following stochastic processesmartingales : Let Wf be a Wiener process and t denote the time. Are the following stochastic processesmartingales?
Does this samsville ordinance violate free exercise clause : The ordinance effectively prohibits the Church from holding services within the Town - Does this Samsville ordinance violate the Free Exercise Clause?
What is the return type of constructors in java language : What is the return type of Constructors in Java language

Reviews

Write a Review

Business Management Questions & Answers

  Job satisfaction and performance evaluation

Why do you think researchers are interested in relationship between job satisfaction and job performance? How are consequences of job satisfaction important to organizations? What would you suggest organizations do to increase job satisfaction?

  Find relevant information about kraft foods company

Find relevant and recent information about Kraft Foods company. The quality problems it's experiencing, the costs of poor quality that occurred, or what it did to eliminate poor quality and implement good quality and the ensuing cost changes.

  Management - locally vs globally

how can the leaders of the organization keep current on the changes that the presence of the organization will bring to each location?

  Annual interest rate on a two-year loan

Suppose we observe the following rates: the interest rate for the next year is 6% and the one-year interest rate expected one year from now is 9%. What is the annual interest rate on a two-year loan?

  Explain how could he use technical-human skills

Explain how could he use technical, human, and conceptual skills to maintain an environment that encourages innovation and professionalism among the virus hunters?

  Renault-volvo alliance

What benefits would merger bring that were not already embodied in the alliance? How might a merger transform the alliance?

  Reasons that global financial markets

1. Select the two reasons that global financial markets are important to borrowers 2. The 1922 Fordney­McCumber Act raised U.S. tariffs to historically high levels 3. Approximately 50 percent of all world trade is conducted through regional trade agr..

  Stakeholders influence corporate finance decisions

Which two types of stakeholders would you argue to be the most important for the modern corporation and why? How do these types of stakeholders influence corporate finance decisions? Is this an appropriate level of influence for these stakehold..

  Describe the federal statute and the oklahoma constitution

claiming that a certain federal statute the DOJ is empowered to enforce conflicts with the U.S. Constitution and with the Oklahoma Constitution. Discuss which law has priority between the U.S. Constitution, the Federal Statute, and the Oklahoma Co..

  State your own position intelligent property rights

State your own position Intelligent Property Rights and offer a defence for it. Utilizing the Ethical Dialectical Process of Thinking state what your ethical position would be on the moral question or dilemma or situation and why

  Offer a minimum of two examples and document the process

Offer a minimum of two examples and document the process of cost commitment during various phase of the product's life cycles

  Compute your estimate of the stocks current price

The companys stock has a beta of 1.2, the risk free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stocks current price?

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