How many shares of millers stock must sell to offset

Assignment Help Financial Econometrics
Reference no: EM13332813

Miller's Dry Goods is an all equity firm with 45,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and taxes are $128,000. Miller's has decided to add leverage to its financial operations by issuing $250,000 of debt at 8 percent interest. The debt will be used to repurchase shares of stock. You own 400 shares of Miller's stock. You also loan out funds at 8 percent interest. How many shares of Miller's stock must you sell to offset the leverage that Miller's is assuming? Assume you loan out all of the funds you receive from the sale of stock. Ignore taxes.

Reference no: EM13332813

Questions Cloud

Make link between chemical composition and sensory analysis : Today's customer has a wide variety of options regarding what he or she drinks. A drinker's choice depends on various factors, including mood, venue, and occasion. Coors' goal is to ensure that the customer chooses Coors brands no matter what the ..
Describe how bridge translates between two segment types : Describe advantages of VLAN trunking. Describe a distance-vector routing protocol suited to WANs. Explain hybrid routing protocols. Describe an example. Describe how a bridge translates between two segment types.
Determine the angular velocity of the weather vane : A weather vane initially at rest has a moment of inertia of 0.110 kg · m2 about its axis of rotation. Find the angular velocity of the weather vane just after it is struck
Explain what happens to the ph when the buffer contains : What happens to the pH when the buffer contains more of the weak acid than the conjugate base. More of the conjugate base than the weak acid
How many shares of millers stock must sell to offset : Miller's has decided to add leverage to its financial operations by issuing $250,000 of debt at 8 percent interest. The debt will be used to repurchase shares of stock. You own 400 shares of Miller's stock.
Determine the cost of a bowl of chili : Determine the cost of a bowl of chili and prepare a batch of chili using the ingredients - Wendy's was founded on the concept of old-fashioned hamburgers. Each hamburger is a square patty, which is served directly from the grill when a customer place..
The best predictor of cumulative gpa : Among the variables high school percentile, ACT English score, ACT math score, and ACT composite score, identify the one that appears to be the best predictor of cumulative GPA. Explain your reasoning.
Compute the linear momentum and angular momentum : Compute the linear momentum and angular momentum of a Frisbee of mass 0.166 kg if it has a linear speed of 2.75 m/s and an angular velocity of 47.5 rad/s
What is minimum level of earnings before interest and taxes : Holly's is currently an all equity firm that has 9,000 shares of stock outstanding at a market price of $42 a share. The firm has decided to leverage its operations by issuing $120,000 of debt at an interest rate of 9.5 percent.

Reviews

Write a Review

Financial Econometrics Questions & Answers

  Calculate the bonds default risk premium

Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.50 percent and the real interest rate is 3.00 percent.

  Determine what annual interest rate is the firm paying

Your company borrows $55,000 today to funds its growth initiatives. It must repay the bank in 4 annual payments of $17,100 at the end of each year. What annual interest rate is your firm paying

  A project report on banking system

The objective of this business report is to focus upon evaluating the current portfolio of Baituna home loans product of Bank Muscat and its volumes. It focus upon the current standing of the product in Oman and its performance on the basis of its vo..

  Determine what is the profit margin of total asset turnover

The Cocona Co. has total equity of $639,400 and net income of $51,700. The debt-equity ratio is .55 and the total asset turnover is 1.5. What is the profit margin

  Calculate the eac for new delivery service

You have two choices: the Scion xA, which will cost $22,500 to purchase and which will have OCF of -$2,900 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius,

  Determine what is the reason for difference in the yields

Alongside, plot your choice of yields of bonds from a publicly traded organization, for the same time periods. * Compare the two yield curves and answer the following questions: Which yield curve is higher

  What is trhe total cost of ordering and carrying inventory

Fisk corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. FIsk anticipates sales of 75,000 units per year, an ordering cost of $8 per order,

  Determine the size of the m1 money mulitplier

What would happen to the money supply if the reserve requirement increased to 14 percent while noncheckable deposits to checkable deposits fell to 35 percent. Assume the other ratios remain as orgiginally stated.

  Should project be accepted based on the discounting approach

Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent

  Determine balance in each account and prepare a trail sheet

Prepare journal entries and record the following October transactions in the T-Accounts and key all entries with the number identifying the transaction. Determine the balance in each account and prepare a trail balance sheet as of October 31.

  Determine what will be the new of the bond of face value

A 10-year bond paying a 10% (semiannual) coupon is priced at 90.50% of face value. if the current yield changes to 12%, what will be the new of the bond

  What would the nominal rate of interest on acme bonds

Inflation is expected to remain constant in the future at 3.3%. Default-risk premium is expected to remain constant at the rate of 1.8% . The liquidity risk is only 0.03% on the bonds.

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