What is debt-equity ratio, Finance Basics

Louis Futon Co. is currently an all-equity firm. The current market value of the company is $80 million. The corporate tax rate is 35%. What is the new value of the company if Louis Futon Co. converts to a debt-equity ratio of 1 with a pure recapitalization? What if the debt-equity ratio is 2? You may ignore the costs of financial distress.

Posted Date: 3/13/2013 6:24:02 AM | Location : United States







Related Discussions:- What is debt-equity ratio, Assignment Help, Ask Question on What is debt-equity ratio, Get Answer, Expert's Help, What is debt-equity ratio Discussions

Write discussion on What is debt-equity ratio
Your posts are moderated
Related Questions
Advantages of Floatation of New Shares 1. It facilitates the matter of securities to increase new finance, creation a company less dependent on retained earnings and banks.

Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding,

Expectation Theory The theory states here that the yield curve depends on the expectation concerning with future inflation rates. The rate on long-term bonds will exceed, If i

Klose Outfitters Inc. believes that its optimal capital structure having of 60% common equity and 40% debt, and its tax rate is 40%. Klose have raise additional capital to fund its

Review the budget below and answer the questions following the budget. FINANCIAL ACCOUNTING—STATEMENT OF REVENUE AND EXPENSES Statement of Revenue and Expenses for Group Practice f

Disadvantages of Overdraft Finance A. It is expensive as the interest rates of overdrafts are much higher than bank rates. B. The employ of this finance is an indication of

Compute the Payback Period - Example Cedes restriction has the following details of two (2) of the future production plans. Just one of these machines will be purchased and su

Evaluate the importance of leverage of financial management of a small scale company

Disadvantages of Debt Finance It is a conditional finance that is it is not invested along with any approval of lender. Debt finance, whether used in excess may interr

Which of the following is not considered to be an investment objective