You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stock. How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest? b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio?
Q: In January 2009, the Status Quo Company was formed. Total assets were $586,000, of which $377,000…
A: As per the given information:To determine:Return on assets
Q: ncial statements for Golf Canada Corp. follow. Liabilities and Owners’ Equity 2022 2022 Current…
A: P/E ratio is most used to know the proper price of stock by comparing with similar type of companies…
Q: ruise Line, Inc. is considering the acquisition of a new ship that will cost 600,000,000. In this…
A: NPV is a capital budgeting tool to decide on whether the capital project should be accepted or not.…
Q: . Assume you have just taken a 30-year mortgage of $550,000 at 9% with monthly compounding. Further,…
A: Loans are paid by equal monthly installments that carry the payment for interest and payment for…
Q: (a) what is the Macaulay Duration of this set of cash flows? Answer correctly to 2 decimal places.…
A: Macaulay's duration is the time taken for the bond to recoup the price paid for the bond. We can…
Q: The Comil Corporation recently purchased a new machine for its factory operations at a cost of…
A: >Please refer to the below spreadsheet for calculation and answer. Cell reference was also…
Q: Your firm uses a 5-year payback period cut-off. Project X has a payback period of 4.25 years. Your…
A: The capital budgeting is the important part in the decision making because the capital budgeting…
Q: Upton Computers makes bulk purchases of small computers, stocks them in conveniently located…
A: The term "self-supporting growth rate" typically refers to the rate at which an entity, such as a…
Q: 1.Gray corporation has a beta of 1.3, the risk-free rate is 3.8 percent and the return on the market…
A: We can determine the required rate of return of Gray Corportion Equity using the CAPM formula as…
Q: Use the following data on bond yield: Yield on top-rated corporate bonds Yield on intermediate-grade…
A: ParticularsCurrent year yieldLast year yieldYield on top-rated corporate bonds5.40%9.60%Yield on…
Q: Use the following data to answer the question regarding the performance of Guardian Stock Fund and…
A: Information ratio is a measure of skill and ability of the portfolio's manager to create excess…
Q: Consider a firm that had been priced using a 10 percent growth rate and a 12 percent required…
A: In the given case, we have provided the dividend recently paid per share, growth rate of dividend…
Q: the wood family wants to save money to travel the world. they plan to invest in an ordinary annuity…
A: An annuity refers to a payment series that provides periodic payments in exchange for a lump sum…
Q: Given the following probability distribution, what is the standard deviation of returns for Security…
A: Mean= Σ [xi*P(xi)]Standard deviation =sqrt(Σ (xi - x̄)^2*P(xi))
Q: In each of the theories of capital structure the cost of equity rises as the amount of debt…
A: Capital structure refers to the mix of debt and equity financing used by a company to finance its…
Q: At year-end 2016, total assets for Arrington Inc. were $1.4 million and accounts payable were…
A: Data given: Total assets at year end 2016 =$1400,000Sales in 2016=$2800,000Common stock in…
Q: Suppose a firm pays total dividends of $696,000 out of net income of $2.4 million. What would the…
A: Companies pay dividends to its shareholders from its profits.The quantum of dividends is decided by…
Q: Question #1 You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000…
A: Equity, proportion of equity and proportion of debt are calculated as shown below.
Q: Please do not give solution in image formate thanku With the growing popularity of casual surf…
A: Net present value (NPV) can be used to evaluate the financial feasibility of a project. NPV is…
Q: For which capital component must you make a tax adjustment when calculating a firm’s weighted…
A: The after-tax cost of debt is the effective interest rate that a company pays on its debt after…
Q: Suppose you're offered the following two accounts to invest $10,000 for 5 years: 11% simple interest…
A: 1. Future value of account earning simple interest is…
Q: You hold a diversified portfolio consisting of many different common stocks with a total market…
A: Bp = ( B1 × w1) + ( B2 × w2)Where,Bp = beta of portfolio B1 = beta of security 1w1 = weight of…
Q: A global equity manager is assigned to select stocks from a universe of large stocks throughout the…
A: Monitoring the rate of return allows investors to track the performance of their investments over…
Q: Suppose you are going to receive $11,000 per year for 8 years. The appropriate interest rate is 11…
A: Present value is the estimation of the current value of future cash value which is likely to be…
Q: wise mechanical engineering graduate began saving money for early retirement by depositing $1300 per…
A: Future Value refers to the compounded value of future cash flows at a specified interest rate.
Q: (Inflation and interest rates) What would you expect the nominal rate of interest to be if the real…
A: Nominal interest rate is computed by following formula-(1+ nominal interest rate) = ( 1+ real…
Q: Jaime has saved $200.00 to buy a new bike. The bike he wants has a regular price of $289.00,…
A: There is markup and mark down on the sale price so as to increase and decrease the price of the…
Q: Amazon.com stock prices gave a realized return of 20%, 12%, 12%, and -12% over four successive…
A: QuartersReturns10.220.123-0.124-0.12Required:Annualized Realized Return=?
Q: You purchase 20 call option contracts with a strike price of $110 and a premium of $1.85. Assume the…
A: A call option is a financial derivative that gives the holder (buyer) the right, but not the…
Q: You own 2,200 shares of Deltona Hardware. The company has stated that it plans on issuing a dividend…
A: Shares of a company represent ownership units or equity in the company. When a company is formed,…
Q: Worldwide Technologies encounters significant uncertainty in its sales volume and price with its…
A: 1. standard deviation = where,NPV = net present valuep = probability2. Coefficient of variation =
Q: A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be…
A: As per Bartleby guidelines, only 3 Sub question can be solved at a time. Please reupload other Sub…
Q: You want to buy a new sports car 3 years from now, and you plan to save $4,800 per year, beginning…
A: FV of annuity= pmt*((1+r)^n-1) /r
Q: Future Value Calculation: step-by-step calculation You deposit $500 at the beginning of each year…
A: Present value is the estimation of the current value of future cash value which is likely to be…
Q: A potential investment has a cost of $395,000 and a useful life of 6 years. Annual cash sales from…
A: Decisions made regarding the capital budget have the potential to affect the financial performance…
Q: Question 2 a) You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000…
A: WACC stands for Weighted Average Cost of Capital. It is a financial metric that represents the…
Q: You like to keep your investment risks at a 85-10-5 proportion (stocks-bonds-cash). After the first…
A: Here,Allocation Proportion is 85-15-5% of Stock is 85%%of Bonds is 15%% of Cash is 5%Original…
Q: Cost of commercial paper Better Effort Corporation sold an issue of 106-day commercial paper with a…
A: Commercial Paper = 106Face Value = $1.3millionProceeds = $1285230Period = 365
Q: Explain with examples, understanding of the impact of financial crimes on the operations of…
A: Financial institutions' day-to-day operations are significantly hampered by financial crimes. These…
Q: Country Markets has an unlevered cost of capital of 12 percent, a tax rate of 38 percent, and…
A: The cost of equity refers to the return that the company provides to its shareholders for their…
Q: Information needed to prepare a bank reconciliation for the DineFine Restaurant for November 30,…
A: Ideally cash balance as per books and bank balance as per bank statement must reconcile with each…
Q: 6. The following graph shows the NPV of a project as a function of the cost of capital. Your actual…
A: IRR is internal rate of return and is break even rate at which net present value is zero and present…
Q: Suppose that you want to avoid paying interest and decide you'll only buy the furniture when you…
A: Monthly payment, M = $110 Annual interest rate, r = 4.7% Term of annuity, t = 2 years
Q: HR Corporation has a beta of 2.0, while LR Corporation's beta is 0.5. The risk-free rate is 10…
A: CAPM also is known as capital asset pricing model which displays the systematic relationship between…
Q: Amanda Tam cannot decide whether to invest in Stock Hewlett or Stock Packard, or in a portfolio…
A: The portfolio return for each alternative can be calculated by multiplying the expected return of…
Q: A bond backed by tangible (real) assets is known as a O a. debenture O b. U.S. government bond c.…
A: Mortgage bonds are debt securities that are secured by specific real assets, such as real estate…
Q: A number of research articles provide evidence that for growth firms, a higher proportion of…
A: Research articles have found that for growth firms, a higher proportion of executive compensation is…
Q: Shannon purchases a bond for $1,142.38. The bond matures in 3 years, and she will redeem it at its…
A: Current bond price = $1,142.38 Maturity, n = 3 years Face value = $1,200 Yield to maturity, r = 6%
Q: As a credit analyst for a provincial development finance institute, Mmusi Trailer Manufacturing Inc.…
A: Current Assets = ca = R13 millionCurrent Liabilities = cl = R7 millionNet Sales = s = R32…
Q: What would you have to do to increase the value of your Company's stock without distributing…
A: To increase the value of a company's stock without distributing dividends for an extended period,…
Cc. 170.
Step by step
Solved in 3 steps with 2 images
- You currently own 900 shares of JKL, Inc. JKL is currently an all equity that has 1,000,000 shares of stock outstanding at a market price of $15 a share. The company's earnings before interest and taxes are $3,000,000. JKL recently decided to issue $3,000,000 of debt at 10 percent interest. This debt will be used to repurchase shares of stock. Ignore taxes and answer the following two questions: Part A: What is JKL's target debt to asset ratio? % Part B: How many shares of JKL stock must you sell to undo the leverage? Assume that you can loan out those funds at 10 percent interest.You currently own 1,100 shares of JKL, Inc. JKL is currently an all equity that has 900,000 shares of stock outstanding at a market price of $30 a share. The company's earnings before interest and taxes are $5,400,000. JKL recently decided to issue $2,700,000 of debt at 5 percent interest. This debt will be used to repurchase shares of stock. Ignore taxes and answer the following two questions: Part A: What is JKL's target debt to asset ratio? 20 % Part B: How many shares of JKL stock must you sell to undo the leverage? Assume that you can loan out those funds at 5 percent interest. 220 xYou currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company’s earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stock. How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest?
- You currently own 600 shares of JKL, Inc. JKL is an all-equity firmthat has 75,000 shares of stock outstanding at a market price of $40a share. The company’s earnings before interest and taxes are $140,000.JKL has decided to issue $1 million of debt at 8 percent interest.This debt will be used to repurchase shares of stock. How many sharesof JKL stock must you sell to unlever your position if you can loanout funds at 8 percent interest?b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%,what will be the implied D/E ratio?a) You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company’s earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stock. How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest?b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio?c) Why is financial leverage considered as a fair-weather friend? (Max 50 words)Executive Chalk is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. a. How is the market price of the stock affected by the announcement? b. How many shares can the company buy back with the $160 million of new debt that it issues? Note: Enter your answer in millions. c-1. What is the market value of the firm (equity plus debt) after the change in capital structure? Note: Enter your answer in millions. c-2. Did the market value of the firm change? d. What is the debt ratio after the change in structure? Note: Round your answer to 2 decimal places. e. Who (if anyone) gains or loses? a. Effect on market price b. Shares repurchased c-1. Market value c-2. Did the market value of the firm change? d. Debt ratio e. Who (if anyone) gains or loses? Stock price remains the same. 160 million 250 million $ No 1.78 No one gains or…
- a) You currently own 600 shares of JKL, Inc. JKL is an all-equity firmthat has 75,000 shares of stock outstanding at a market price of $40a share. The company’s earnings before interest and taxes are $140,000.JKL has decided to issue $1 million of debt at 8 percent interest.This debt will be used to repurchase shares of stock. How many sharesof JKL stock must you sell to unlever your position if you can loanout funds at 8 percent interest?b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%,what will be the implied D/E ratio?c) Why is financial leverage considered as a fair-weather friend?All computations must be done and shown in detail a) You currently own 600 shares of JKL, Inc. JKL is an all-equity firm that has 75,000 shares of stock outstanding at a market price of $40 a share. The company’s earnings before interest and taxes are $140,000. JKL has decided to issue $1 million of debt at 8 percent interest. This debt will be used to repurchase shares of stock. How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 8 percent interest? b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%, what will be the implied D/E ratio? c) Why is financial leverage considered as a fair-weather friend? (Max 50 words)a) You currently own 600 shares of JKL, Inc. JKL is an all-equity firmthat has 75,000 shares of stock outstanding at a market price of $40a share. The company’s earnings before interest and taxes are $140,000.JKL has decided to issue $1 million of debt at 8 percent interest.This debt will be used to repurchase shares of stock. How many sharesof JKL stock must you sell to unlever your position if you can loanout funds at 8 percent interest?b) If the cost of equity is 25%, the WACC is 16% and cost of debt is 10%,what will be the implied D/E ratio?c) Why is financial leverage considered as a fair-weather friend? (Max50 words) Give a step by step break down of the answer
- You own 1,000 shares of stock in Avondale Corporation. You will receive a $3.45 per share dividend in one year. In two years, the company will pay a liquidating dividend of $62 per share. The required return on the company's stock is 15 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would your cash flow be for each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is not complete. a. Share price b. Number of shares c. Cash flow 1,950.00 $ 64,242.50 XMiller'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. A. 35.6 shares B. 40.0 shares C. 44.4 shares D. 47.5 shares E. 50.1 sharesCross Town Cookies is an all-equity firm with a total market value of $780,000. The firm has 46,000 shares of stock outstanding. Management is considering issuing $197,000 of debt at an interest rate of 9 percent and using the proceeds to repurchase shares. Before the debt issue, EBIT will be $71,000. What is the EPS if the debt is issued? Ignore taxes. rev: 06_14_2019_QC_CS-170956 Multiple Choice $.98 $1.32 $1.55 $1.68 $1.79