Suppose that Papa Bell, Inc.’s equity is currently selling for $42 per share, with 3.7 million...

Suppose that Papa Bell, Inc.’s equity is currently selling for $42 per share, with 3.7 million shares outstanding. The firm also has 7,000 bonds outstanding, which are selling at 94 percent of par. Assume Papa Bell was considering an active change to its capital structure so as to have a D/E of 0.4. Which type of security (stocks or bonds) would the firm need to sell to accomplish this? sell bonds and buy back stock sell stocks and buy back bonds. How much would it have to sell?

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jeff jeffy answered 5 months ago

Suppose that Papa Bell, Inc.'s, equity is currently selling for $41 per share, with 3.6 million...

Suppose that Papa Bell, Inc.'s, equity is currently selling for $41 per share, with 3.6 million shares outstanding. The firm also has 8,000 bonds outstanding, which are selling at 95% of par. Assume Papa Bell was considering an active change to its capital structure so as to have a D/E of 0.5. Which type of security (stocks or bonds) would the firm need to sell to accomplish this? How much would it have to sell? (Enter your answer in dollars...

Suppose that a company's equity is currently selling for $24.50 per share and that there are...

Suppose that a company's equity is currently selling for $24.50 per share and that there are 3.2 million shares outstanding and 12 thousand bonds outstanding, which are selling at 93 percent of par. If the firm was considering an active change to their capital structure so that the firm would have a D/E of 0.5, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell? (Round your...

Suppose that a company's equity is currently selling for $23.50 per share and that there are...

Suppose that a company's equity is currently selling for $23.50 per share and that there are 4.60 million shares outstanding. If the firm also has 36 thousand bonds outstanding, which are selling at 104.00 percent of par, what are the firm's current capital structure weights for equity and debt respectively? A. 74.28%, 25.72% B. 22.60%, 77.40% C. 50%, 50% D. 65.37% 34.63%

Suppose that a company's equity is currently selling for $26.00 per share and that there are...

Suppose that a company's equity is currently selling for $26.00 per share and that there are 5.60 million shares outstanding. If the firm also has 46 thousand bonds outstanding, which are selling at 109.00 percent of par, what are the firm's current capital structure weights for equity and debt respectively? Equity = 5,600,000 x $26 = $145,600,000, so .7438 Debt = 46,000 x 1.090 x 1,000 = $50,140,000, so .2562 Total = $195,740,000 74.38%, 25.62%

Suppose that a company's equity is currently selling for $24.75 per share and that there are...

Suppose that a company's equity is currently selling for $24.75 per share and that there are 3.3 million shares outstanding and 13 thousand bonds outstanding, which are selling at 94 percent of par. If the firm was considering an active change to their capital structure so that the firm would have a D/E of 0.6, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell? (Round your...

Suppose that Lil John Industries’ equity is currently selling for $32 per share and that 1.5...

Suppose that Lil John Industries’ equity is currently selling for $32 per share and that 1.5 million shares are outstanding. Assume the firm also has 25,000 bonds outstanding, and they are selling at 103 percent of par. What are the firm’s current capital structure weights? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Equity % = Debt % =

Valley Corp.'s stock is currently selling at $40 per share. There are 1 million shares outstanding....

Valley Corp.'s stock is currently selling at $40 per share. There are 1 million shares outstanding. The firm is planning to raise $2 million to finance a new project. What are the ex-rights stock price, the value of a right, and the appropriate subscription prices under the following scenarios? a. Two shares of outstanding stock are entitled to purchase one additional share of the new issue. (Do not round intermediate calculations and round your answers to 2 decimal places,...

Elmo Inc.'s stock is currently selling at $60.26 per share. For each of the following situations...

Elmo Inc.'s stock is currently selling at $60.26 per share. For each of the following situations (ignoring brokerage commissions), calculate the gain or loss that Courtney Schinke realizes if she makes a 100-share transaction. (Enter all losses as negative numbers.) a. She sells short and repurchases the borrowed shares at $68.01 per share. b. She takes a long position and sells the stock at $75.21 per share. c. She sells short and repurchases the borrowed shares at $42.35 per share....

Q1. An all-equity financed firm has 1 million shares outstanding, currently selling at $10 per share....

Q1. An all-equity financed firm has 1 million shares outstanding, currently selling at $10 per share. It considers a restructuring that would issue $4 million in debt to repurchase 400,000 shares. How does this affect overall firm value? Q2: What is the expected return on equity for a firm with a 14% expected return on assets that pays 9% on its debt, which totals 30% of assets? Q3: What is the expected rate of return to shareholders if the firm...

Suppose that ZX Inc. is currently selling at $50 per share. You buy 200 shares, using...

Suppose that ZX Inc. is currently selling at $50 per share. You buy 200 shares, using $5,000 of your own money and borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 5%. What is the rate of return on your margined position (assuming again that you invest $5,000 of your own money) if ZX Inc. is selling after one year at (i) $54, (ii) $50, (iii) $46?

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