User Account

All Pages

Expected return of the stock after transaction

Assignment Help Finance Basics
Reference no: EM132673517

Global Pistons? (GP) has common stock with a market value of $460 million and debt with a value of $315 million. Investors expect a 16% return on the stock and a 7% return on the debt. Assume perfect capital markets.

a. Suppose GP issues $315 million of new stock to buy back the debt. What is the expected return of the stock after this? transaction?

b. Suppose instead GP issues $100.23 million of new debt to repurchase stock.

i. If the risk of the debt does not? change, what is the expected return of the stock after this? transaction?

ii. If the risk of the debt? increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part ?(i?)?

Reference no: EM132673517

Questions Cloud

Is tesla a technology or automobile firm : Which product, or products, should Tesla focus on? What justifies your recommendation? Is Tesla a technology or automobile firm and does the distinction matter?
Present value of the cash flows-canine inc : Canine, Inc., has identi?ed an investment project with the following cash ?ows. If the discount rate is 8 percent for the first 2 years and 6% for the years aft
What market segment are the commercials targeted at : What market segment are the commercials targeted at (describe these target markets)? Are the messages aligned with the IMC objectives?
Motivating employees through compensation and benefits : How can HR staff work with organizational managers to create an effective incentive and motivation plan to make employees more effective and efficient?
Expected return of the stock after transaction : a. Suppose GP issues $315 million of new stock to buy back the debt. What is the expected return of the stock after this? transaction?
Identify five recent commercials : Identify five recent commercials that you have seen or watched that you believe are effective at advertising. Identify part of the Hierarchy of Effects Model
Suggest an attractive tax plan to carry out : Suggest an attractive tax plan to carry out what the parties want. Write a letter (addressed to Emerald Corporation at PO Box 940, Rochester, NY 14692)
Risk and the various trade finance instruments : Using a relevant example, detail your understanding of the relationship between risk and the various trade finance instruments.
Identify the part of the hierarchy of effects model : Identify the part of the Hierarchy of Effects Model that the advertisement targets, noting the specific step in the model related to the part.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd