### Unsure of how to calculate the new stock price

Assignment Help Finance Basics
##### Reference no: EM13681391

Unsure of how to calculate the new stock price for the following question: Assume that a company has \$10 million in assets (where the market value of the assets is equal to the book value of the assets) and no debt. The company's marginal tax rate is 35% and has 500,000 shares outstanding. The company's earnings before interest and taxes (EBIT) is \$3.88 million. The firm's stock price is \$27 per share and the cost of equity is 11%.
The company is thinking of issuing bonds and simultaneously repurchasing a portion of its stock. If the company changes its capital structure from no debt to 25% debt based on market values, the firm's cost of equity will increase to 13% because of the increased risk. The bonds can be sold at a cost of 9%. The firm's earnings are not expected to grow over time. All of its earnings will be paid out as dividends.

### Previous Q& A

#### Compute the potential drop across one of the resistors

A circuit consists of two 110-kohms resistors in series with an ideal 15.0-V battery. Compute the potential drop across one of the resistors.

#### Find at what frequency will this combination have twice

An 1800 Ω resistor is connected in series with a 310 mH inductor and an ac power supply. Find at what frequency will this combination have twice the impedance that it has at 120 Hertz

#### Decide the mass of the valve stem

A cyclist turns her bicycle upside down to repair it. She then notices that the front wheel is executing slow, small amplitude, back-and-forth rotational motion with period 12s. Treating the wheel as a thin ring of radius 30 cm and mass 600 g, whose ..

#### Obtain what is the magnification of the telescope

An astronomical telescope uses an eyepiece of power +80.000 D. If the length of the tube is 2.0125 meter, obtain what is the magnification of the telescope

#### Find the impedance for a given source frequency

A 64 Ω resistor, an 7.4 uF capacitor, and a 38 mH inductor are connected in series in an ac circuit. Find the impedance for a source frequency of 300 Hertz

#### What are some of the caveats we must keep in mind

What are some of the caveats we must keep in mind

#### A few extraterrestrials arrived

A few extraterrestrials arrived. They had two hands, however claimed that 5+4=11 . How many fingers did they have on their two hands? Note that our decimal system (and ten characters: 0, 1, 2, 9) certainly has its origin because we have ten fingers.

#### Compute the rms voltage of this source

A sinusoidal ac voltage source in a circuit produces a maximum voltage of 12.6 Volt and an rms current of 7.50 mA. Compute the rms voltage of this source

#### What is velocity-consider a set of conducting metal tracks

Consider a set of conducting metal tracks (two parallel beams by a flat top surface) 0.3 m apart. Across the tracks, perpendicular to them is a conducting rod of mass 0.65 kg. There is a uniform magnetic field of 0.80 T [Tesla, the SI unit of magneti..

#### How does the treatment of owners equity

How does the treatment of owners equity

### Similar Q& A

#### Which method of arriving at the floating rate should it

the bank cited in the foregoing illustrations wants to charge floating rates for its borrower since it expects

#### Should tom swift accept the project

Tom Swift's new project has a projected return of 11.9%. The risk-free return is 10% and the market risk premium is 5%. All firms have a marginal tax rate of 40%. Tom Swift's before-tax cost of debt is 13%.

#### What discount rate should the firm apply to a new project

What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?

#### If you deposit money today in an account that pays 7

if you deposit money today in an account that pays 7 annual interest how long will it take to double your money? round

#### Campbell corporation uses baumol model to manage cash the

1. campbell corporation uses baumol model to manage cash. the cost of transferring money from a money-market fund which

#### Calculate the wacc for this firm

Common stock: 240,000 shares outstanding, selling for \$64.80 per share, beta is .88 and will pay a dividend of \$3.00 next year.The dividend is expected to grow by 5.3% per year indefinitely.

#### How is risk defined in capital budgeting analysis list

how is risk defined in capital budgeting analysis? list several aspects of a project in which risk is involved and how

#### Find market anticipate yield on one year treasury securities

One year treasury securities yield 6.9%, while two year Treasury securities yield 7.2%. If the expectations theory is correct (that is, the maturity risk premium = 0)

#### The sec web site

The SEC web site.

#### As the newly hired financial analyst for rodgers

as the newly hired financial analyst for rodgers international you are charged with evaluating a possible investment by

#### The price of garner stock is 40 there is a call option on

the price of garner stock is 40. there is a call option on garner stock that is at the money with a premium of 2.00.

#### What is the maximum acceptable amount of equity financing

if equity investors require a 20 rate of return what is the maximum acceptable amount of equity financing for a #### 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!