By how much the company stock should rise or fall

Assignment Help Finance Basics

Reference no: EM131923266

Question: General Petrochemical Pcl plans to borrow 1 billion baht of bank loans to fund its plant expansion. The company pays the minimum lending rate (MLR) of 10 percent on the loans. As a listed company on the stock exchange, it pays a corporate tax rate of 25 percent.

The company expects the debt repayment will increase its interest expenses by 100 million baht a year. It plans to maintain its outstanding debt at this level. The company has 50 million shares traded on the Stock Exchange of Thailand. The share price closed at 10 baht yesterday.

In M&M theory, the company's stock should rise or fall after this announcement and by how much? Please explain.

Reference no: EM131923266

Questions Cloud

Examine role of third world pressure groups such as unctad : Examine the role of Third World pressure groups such as UNCTAD. What criteria and data would you use to decide if Hong Kong were developed?

Advise Al on which method of accounting should be used : Al is a medical doctor who conducts his practice as a proprietor. Advise Al on which method of accounting should be used

How much must stephanie save at the beginning of each year : Stephanie wanted to save for her daughter's education. Tuition costs $10,000 per year in today's dollars. Her daughter was born today and will go to school.

Who is responsible for the international debt crisis : Why is an efficient banking sector important for developing countries? Who is responsible for the international debt crisis, and what should be done abou

By how much the company stock should rise or fall : General Petrochemical Pcl plans to borrow 1 billion baht of bank loans to fund its plant expansion. The company pays the minimum lending rate (MLR).

Complete Celebrity Catering Service Inc Form 1120 : Complete Celebrity Catering Service Inc.'s (CCS) 2012 Form 1120, 1125--A, 1125--E and all related schedules--Schedules C, G, J, K, L, M--1, and M--2.

Why might nations not wish to specialize : Why might nations not wish to specialize even when they have a comparative advantage in the production of some goods com-pared with other countries?

What is the project payback period : An investment project provides cash inflows of $404 per year for eight years. What is the project payback period if the initial cost is $2388?

Why might theory of rational expectations be more relevant : Why might the theory of rational expectations be more relevant in explaining the behavior of financial markets than the effect of monetary policy on the level?

User Account

All Pages