New value of the equity, Corporate Finance

Assignment Help:

GeKay is now considering issuing $3 million in debt, and paying $150,000 yearly in interest at 5%, that it would keep rolling over "forever" (in perpetuity).

The proceeds would be used torepurchase stock.  If GeKay were to go by and implement the debt issue & repurchase:

a. What would be the new value of the firm?

b. What would be the new value of the equity?

 


Related Discussions:- New value of the equity

Equal division - forecasting methods, Equal division divides M equally over...

Equal division divides M equally over the SKUs in N. Thus, There are two main reasons for including this simplistic approach. First, the approach is used by the case compan

Determine the tax loss on the sale, Jackson Corporation prepared the follow...

Jackson Corporation prepared the following book income statement for its year ended December 31, 2011: Sales

Mergers & Acquisitins, Relationship between the size of companies and the r...

Relationship between the size of companies and the role of M & A

Indifference point., why debt and preferred stock do not meet each other wh...

why debt and preferred stock do not meet each other while in determining indifference point...

Renowned Cola, corporate finance, Financial Accounting Calculate the market...

corporate finance, Financial Accounting Calculate the market value of Renowned Cola''''s debt at year-end 2005. What is the book value of debt? Why do usually use market or book va

Determine the rate of return, The following information is given for Burgun...

The following information is given for Burgundy Plc. The before tax rate on debt is 10%, whereas the required return on equity is 20%. The total amount in use (equity + debt), V, i

Calculate the firm''s corporate cost, Morningside nursing Home, a not-for-p...

Morningside nursing Home, a not-for-profit corporation, is estimating its corporate cost of capital.  Its tax-exempt debt currently requires an interest rate of 6.2 perce

Agency relationships, what is the agency relationship between shareholders ...

what is the agency relationship between shareholders and auditore

Abu dhabi investment authority - adia, ADIA is a government-owned investmen...

ADIA is a government-owned investment organization that administers the sovereign wealth fund for Abu Dhabi, United Arab Emirates. As per the Sovereign Wealth Fund Institute's rank

Calculate the repo rate, Question: (a) Distinguish, using financial ass...

Question: (a) Distinguish, using financial assets as examples, between securities quoted at par and securities quoted on a discount. (b) Calculate the value of a £50,000 Tre

Write Your Message!

Captcha
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