What will be the debt-to-equity ratio

Assignment Help Finance Basics
Reference no: EM13265768

Reliable Gearing currently is all-equity-financed. It has 12,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $250,000 with the proceeds used to buy back stock. The high-debt plan would exchange $500,000 of debt for equity. The debt will pay an interest rate of 10.2%. The firm pays no taxes.

What will be the debt-to-equity ratio after each contemplated restructuring?

If earnings before interest and tax (EBIT) will be either $100,000 or $145,000, what will be earnings per share for each financing mix for both possible values of EBIT?

 

Reference no: EM13265768

Questions Cloud

How far north of the starting position does carlos finish : Carlos runs with velocity v=(5.0 m/s, 25 degrees north of east) for 10 min. How far north of his starting position does Carlos finish
Find the divers average angular velocity during a dive : A diver makes 2.5 revolutions on the way from a 11-m-high platform to the water. find the diver's average angular velocity during a dive
What is the cost of common equity capital for the firm : If the current price of Two-Stage's common stock is $17.61, what is the cost of common equity capital for the firm?
Determine what is the velocity of the child : A child is sitting on the outer edge of a merry-go-round that is 18 m in diameter. If the merry-go-round makes 5.4 rev/min, what is the velocity of the child in m/s
What will be the debt-to-equity ratio : What will be the debt-to-equity ratio after each contemplated restructuring?
Find the peak magnetic field in an electromagnetic wave : Find the peak magnetic field in an electromagnetic wave whose peak electric field is 200N/C
How far does tina drive before passing david : David is driving at a steady 30 m/s when he passes Tina, who is sitting in her car at rest. Tina begins to accelerate at a steady 2.0 m/s2 at the instant when David passes. How far does Tina drive before passing David
Determine what is the tension in the string : A 200 g block on a 50 cm long string swings in a circle on a horizontal, frictionless table at 75 rpm. What is the speed of the block What is the tension in the string
Determine the wavelength in water of light : Light travels at about 0.75c in water. What's the wavelength in water of light whose wavelength in vacuum is 664nm

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Explain how many u.s dollars will you need in one year

Explain how many U.S dollars will you need in one year to fulfill your forward contract?

  Important information about the time value

John E. Nvestor is planning his own retirement plan and needs to create a savings plan for his retirement. He wants to receive $5,000 monthly at the beginning of his retirement age of 65 years.

  Identify and analyze the effect of the payment of interest

Identify and analyze the effect of the payment of interest and the amortization of premium on December 31,2014 (the third year), and determine the balance sheet presentation of the bonds on that date.

  Calculate the current yield on this bond

What dollar amount of interest will he receive from this bond every six months? Explain or show work.

  What would be the total return of the bond in dollars

A 8.1 percent coupon bond with 17 years left to maturity is priced to offer a 6.55 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.2 percent.

  Predicting the company likely balance sheet

Do you think the percentage of sales method may be more or less accurate in predicting the company's likely balance sheet?

  Discuss the major capital budgeting methods

Discuss the major capital budgeting methods used by corporations to evaluate projects. Why do many corporations continue to use the payback period method? Which method do you prefer? Explain why you prefer this method.

  Explain what is his wealth in paper

Explain what is his wealth in paper and cash for each level of desired dividend income level

  What is the profitability index of the project

Suppose Conch Republic loses sales on other models because of the introduction of the new model. How would this affect your analysis?

  Cash management approach

A corporation uses a Miller-Orr cash management approach with a lower limit of $50,000, an upper limit of $130,000, and a target balance of $75,000.

  Compute the value of a share

Von Bora Company is expected to pay a $3.00 dividend at the end of this year. If you expect Von Bora Company's dividend to grow by 6 percent per year forever and VBC's equity cost of capital is 12%,

  Find expected degree of operating leverage

In light of a sales agreement that NVW just signed with national chain of health food restaurants, NVW CFO, Jackie Cheng, is determining that NVW's sales in the next year will be 50,000 bottles at $30 each bottle.

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