Loan out all of funds you receive from sale of your stock

Assignment Help Financial Management
Reference no: EM13934480

Martin and Sons (M and S) currently is an all equity firm with 64,000 shares of stock outstanding at a market price of $25 a share. The company's earnings before interest and taxes are $86,000. M and S has decided to add leverage to their financial operations by issuing $610,000 of debt with a 8% percent interest rate. This $610,000 will be used to repurchase shares of stock. You own 1,600 shares of M and S stock. You also loan out funds at a 8% percent rate of interest. How many of your shares of stock in M and S must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.

 

659 shares  610 shares  406 shares  561 shares  634 shares

Reference no: EM13934480

Questions Cloud

Division was profitable immediately under the new ownership : A major manufacturer decided to put one of its divisions up for sale because managerial information showed the components produced by this division is losing money. A group of employees in the division purchased it. Under the new ownership, the divis..
The annual profits from this new piece of equipment : The Central Clinic, a local not for profit health center, is considering investing $5,000 today in a new piece of screening equipment. The annual profits from this new piece of equipment will be $800 for each of the seven years of its useful life. Wh..
Evidence on the global burden of depression : The burden of depression: Citing existing evidence on the global burden of depression from lectures 1 and 2, describe why thinking of depression makes sense in this scenario.
Use the concept of you get what you measurer in your answer : Use the concept of You get what you measurer in your answer.
Loan out all of funds you receive from sale of your stock : Martin and Sons (M and S) currently is an all equity firm with 64,000 shares of stock outstanding at a market price of $25 a share. The company's earnings before interest and taxes are $86,000. How many of your shares of stock in M and S must you sel..
Bubble sort, insertion sort, selection sort : As a new and eager employee of Google Tech; you've been asked by your employer to implement a sorting algorithm for inclusion in a package for a lucrative client.
How can electrolyte imbalance control our heart function : Electrolyte balance is very important in our body. This balance can even greatly influence our heart functions - causing arrhythmia or even a heart attack. Lets discuss this situation - how can electrolyte imbalance control our heart function?
Explain the output employment wage and income distributional : Using the diagram below explain the output, employment, wage, and income distributional consequences of an increase in migration of labour = L1US - L2US from Mexico to the USA.
Core principles that underlie your approach to leadership : What are the core principles that underlie your approach to leadership and in light of the ideas presented in this course, how you will lead in the future?

Reviews

Write a Review

Financial Management Questions & Answers

  After-tax profit margin is forecasted

Broussard Skateboard's sales are expected to increase by 20% from $8.6 million in 2013 to $10.32 million in 2014. Its assets totalled $5 million at the end of 2013. Baxter is already at full capacity, so its assets must grow at the same rate as proje..

  What is the amount of the loan

C Corp borrowed money from XYZ Bank at 11.53% interest for nine years. The loan calls for annual payments of $9,846.38 beginning today. What is the amount of the loan?

  Sales and earnings for emovies are expected to grow rapidly

Sales and earnings for eMovies are expected to grow rapidly over the next 5 years. Although the firm is currently losing money, eMovies expects to begin paying out 60% of earnings during the fiscal year ending in June of 20/20, with initial sharehold..

  Appropriate expected rates of return for three securities

The expected return for the general market is 13.0 percent. Tasaci, LBM and Exxos have betas of 0.896,0.651 and 0.598 respectively. What are the appropriate expected rates of return for the three securities?

  What was the intrinsic value of this put

What was the premium on the Dec. BABA 118 put? Was this option in or out of the money? What was the intrinsic value of this put? What is the time value?

  Initial cash flow is negative

Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct?

  Install the equipment necessary to start production

Dahlia Enterprises needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $870,000 to install the equipment n..

  1 calculate the audjpy cross rate when the following fx

1 calculate the audjpy cross rate when the following fx spot rates are quoted bullaudusd0.6066bullusdjpy115.90 give

  Analysis of a proposed ambulatory surgery

Assume that your organization's chief financial officer (CFO) has just completed a presentation to the board of trustees concerning the analysis of a proposed ambulatory surgery center costing $2 million. During the presentation, the CFO indicated th..

  Evaluating a project for a small manufacturing firm

You are evaluating a project for a small manufacturing firm. The firm has provided the following information: the initial cost of the project is $2,500 for equipment purchase; the CCA rate is 10 percent; tax rate is 25 percent; and the pre-tax cash f..

  What was its interest expense

Molteni Motors Inc. recently reported $3.25 million of net income. Its EBIT was $7.75 million, and its tax rate was 35%. What was its interest expense? Round your answer to the nearest dollar. Enter your answer in dollars. For example, an answer of $..

  Debt security with a purpose of consolidating

Assume that in 2007 the U.S. Government issued a debt security with a purpose of consolidating all of the federal national debt. At the time of the issue, each security was priced at $15,000 and promised to pay 10% coupon rate indefinitely, just as i..

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