User Account

All Pages

What is target debt to asset ratio

Assignment Help Finance Basics
Reference no: EM131152775

1) Fells Cove uses no debt. The weighted average cost of capital is 10.4%. The current market value of equity is $25,000,000 and the corporate tax rate is 34%. What is EBIT?

2) You currently own 1200 shares of GSH Inc. GSH is an all equity firm that has 100,000 shares of stock outstanding and a market price of $42 per share. The company's EBIT are $780,000. You believe that GSH should finance 20% of assets with debt, but management refuses to leverage the company. Given that similar firms pay 6% interest on debt, a) how much money should you borrow to create the leverage on you own if you assume a 6% interest on borrowed funds? And b) How many additional shares of GSH do you need to purchase to create leverage on you own?

3) You currently own 800 shares of RBJ Inc. RBJ is an all equity firm that has 800,000 shares of stock outstanding with a market price of $36 per share. The company's EBIT are $6,200,000. RBJ has decided to issue $6,200,000 of debt at 10% interest. This debt will be used to repurchase shares of stock. Ignore taxes.

a) What is target debt to asset ratio? And b) How many shares of RBJ stock must you sell to undo the leverage if you can loan out funds at 10% interest?

Reference no: EM131152775

Questions Cloud

Analyze whether or not harley-davidson source of sustainable : Using all you have learned to date about Harley-Davidson, analyze whether or not Harley-Davidson has a source of sustainable competitive advantage. Defend your answer using examples from your readings, the annual report, and other sources.
Specializes in small business furniture and equipment : You are interviewing for a job with an online retail company that specializes in small business furniture and equipment. The job would require you to deal with the different vendors whose products are featured and sold through the online retail site...
Rate of return on investment : Charlotte pays P2.50 per share dividend. AT the end of one year, you buy 100 shares of Charlotte at P45 to close out your position and charged a commission of P145 and 8% interest on the money borrowed. What is your rate of return on Investment?
How influential is their input to the design project : In the facility design, who are the stakeholders and how influential is their input to the design project? Why do you think health care facility building is so expensive? What drives costs? Thinking about your own community and the major health care ..
What is target debt to asset ratio : What is target debt to asset ratio? And b) How many shares of RBJ stock must you sell to undo the leverage if you can loan out funds at 10% interest?
Find ways to enhance market power by pooling : Find economies of scope. Provide examples of specific actions Harley-Davidson's managers could take to reduce expenses or share activities through horizontal relationships across brands.
Indicate an adjusting entry : Find a line item listed on either the income statement or balance sheet that would indicate an adjusting entry and describe the entry. What do you think the effect would be on the company's financial statements if the adjustment was not made?
Explain the manner in which users would benefit : Then, select one template and explain the manner in which users would benefit from using the template in question in creating either a business or personal document.
Determine environmental stability : In SPACE analysis, there are key factors that determine "environmental stability." Which one of the following is a factor included in rating environmental stability?

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: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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