suppose that the Matrix corporation has $120million of assets, all financed with equity, and thatthe form has 6 million shares of stock outstandingvalued at $40 per share, suppose that managementhas identified investment opportunities requiring$60 million of new funds and can raise the funds inone of the following three ways: Financing package1: Issue $60 million equity (3,000,000) shares ofstocks at $40 per share) • Financing package 2:Issue $30 million equity (1,500,000) shares of stocksat $40 per share), and borrow $30 million with anannual interest rate 8% • Financing package 3:Borrow $60 million with an interest of 8%. a.Complete the following table for each financingpackage after the financing capital structure iscompleted: - Debt Equity No. of Shares Debt-equityratio Debt-to- Financing package Assets Asset ratio23b. Suppose the Matrix Corporation has $27 millionof operating earings. Show that the firm's return onassets is 15% c. compute the earnings per share forthe three financing packages by completing thetable below: Financing packages 2. Operatingearnings in millions - Interest expense in million =Earnings available to owners in millions No. ofshares in millions Earnings per share

The combination of debt and equity used to fund a company's assets and activities is referred to as…

suppose that the Matrix corporation has $120 million of assets, all financed with equity, and that the form has 6 million shares of stock outstanding valued at $40 per share, suppose that management has identified investment opportunities requiring $60 million of new funds and can raise the funds in one of the following three ways: Financing package

suppose that the Matrix corporation has $120 million of assets, all financed with equity, and that the form has 6 million shares of stock outstanding valued at $40 per share, suppose that management has identified investment opportunities requiring $60 million of new funds and can raise the funds in one of the following three ways: Financing package

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 8P

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