Different capital structures-what is price per share of plan

Assignment Help Financial Management
Reference no: EM131354184

Haskell Corp. is comparing two different capital structures. Plan I would result in 11,000 shares of stock and $80,000 in debt. Plan II would result in 8,375 shares of stock and $150,000 in debt. The interest rate on the debt is 6 percent. Assume that EBIT will be $60,000. An all-equity plan would result in 14,000 shares of stock outstanding. Ignore taxes. What is the price per share of equity under Plan I? Plan II?

Reference no: EM131354184

Questions Cloud

German company issues bond with par value : Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon r..
What is the value of a put option with a strike price : The price of a risk free bond with face value $12 and maturity one year is 0.5 dollars higher than the spot price of stock A. Also, a call option on stock A with a strike price $12 and maturity 1 year, has a premium of $0.21. What is the value of a p..
Disregard self-employment taxes for kate : Determine the Sawyer's taxable income for 2016. Disregard self-employment taxes for Kate. Assume the couple paid $4,400 in state income taxes and files a joint return. The Sawyers would like to use the method for determining deductible home office ex..
Used interchangeably with occupational fraud : The term “white-collar crime” is often used interchangeably with occupational fraud. Some believe that investigations into white-collar crime are a low priority for law enforcement agencies. Why might this be true?
Different capital structures-what is price per share of plan : Haskell Corp. is comparing two different capital structures. Plan I would result in 11,000 shares of stock and $80,000 in debt. Plan II would result in 8,375 shares of stock and $150,000 in debt. The interest rate on the debt is 6 percent. Assume tha..
What price would you estimate for stock : Halliford Corporation expects to have earnings this coming year of $3.28 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two? years, the firm will retain 49% of its earnings. It will then retain 19%..
What is the value of liverpools asset : Liverpool Ferries is a navigation company. Until last year Liverpool had no debt, and last year its operations had an expected net income of 2 million GBP. At the end of the year the company undertook some debt so that the debt-to-equity ratio is now..
Equal to the required rate of return the project : If the IRR is equal to the required rate of return the project should be? Explain Why. Jessica currently owns 500 shares of Alpha stock valued at $19 share. What will her investment in Alpha be worth if the company declares a 4-for-3 stock split?
Equilibrium according to interest rate parity theory : Suppose the 360-day forward exchange rate is 1.657 dollars per British pound, and the current spot rate is 1.625 dollars per British pound. If the 360-day interest rate in the United States is 5% and the 360-day interest rate in Great Britain is 3%, ..

Reviews

Write a Review

Financial Management Questions & Answers

  The dividend yield on the preferred stock

The CCC Venture has issued convertible preferred stock to its venture investors. Each share of preferred stock is convertible into 0.80 share of common stock and pays an annual cash dividend of $0.25. If each share of preferred stock has a market val..

  How many shares need to be sold

The Dunning Co. needs to raise $66.7 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $67 per share and the company’s underwriters ..

  Calculate how much you might expect to earn from project

Let’s try to examine the most glaring issue with IRR via an example. Let’s suppose a friend of yours offers you an "investment." He knows that every year there is one day when some lottery numbers are fixed. calculate how much you might expect to ear..

  Computation of the risk premium for an individual security

Which one of the following is the computation of the risk premium for an individual security? E(R) is the expected return on the security, Rf is the risk-free rate, β is the security's beta, and E(RM) is the expected rate of return on the market.

  Addition net working capital investments

Production of the implants will require $1,800,000 in net working capital to start and addition net working capital investments each year equal to 15 percent of the projected states sales increase for the following year. Total fixed costs are $2,500...

  What are cimarron state total risk-weighted assets

Cimarron State Bank reports the following items on its balance sheet: cash = $200 million; U.S. government securities = $150 million; residential real estate loans = $300 million; and corporate loans = $350 million. What are Cimarron State’s total ri..

  Give in one paragraph your reasoning why someone should

select 3 outcomesconcepts you learned in this class. explain why there are important for you and how will you use what

  Ways that northam could reduce its collection float

If the cost of implementing your recommendation is $100,000 per year, based on your finding in part (b), should NorthAm implement it?

  Investors think about the risk of individual stocks

Should portfolio effects impact the way investors think about the risk of individual stocks? Question B Stocks, stock valuation, and stock market equilibrium are all components of interest to potential investors. Briefly describe the legal rights and..

  Hamada equation-establish its optimal capital structure

Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital structure consists of 30% debt and 70% equity; however, the CEO believes the firm should use more debt. The risk-free rate, rRF, is 6%; the market risk pre..

  What is the annuity worth in terms of single equivalent

An annuity provides for 11 consecutive end-of-year payments for $67000. The average general inflation rate is estimated to be 2% annually, and the market interest rate is 6% annually. What is the annuity worth in terms of a single equivalent amount i..

  Calculate the terminal value at the end of year

Calculate the terminal value at the end of 10 years for a project if the net cash inflow generated in year 10 is $51,900, assuming that cash flows beyond the 10th year grow at 5% and are discounted at 10 percent.

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