Question

In: Finance

Meyer Inc’s total invested capital is $676,000, and its total debt outstanding is $185,000. The new...

Meyer Inc’s total invested capital is $676,000, and its total debt outstanding is $185,000. The new CFO wants to establish a total debt to total capital ratio of 25%. The size of the firm will not change.

How much debt must the company add or subtract to achieve the target debt to capital ratio?

Solutions

Expert Solution

The company must subtract $16,000 to achive the target debt to capital ratio.

Total Debt outstanding must be $169,000 .


Related Solutions

Ghost, Inc., has no debt outstanding and a total marketvalue of $185,000. Earnings before interest and...
Ghost, Inc., has no debt outstanding and a total marketvalue of $185,000. Earnings before interest and taxes, EBIT, are projected to be $29,000 if economic conditions are mormal. If there is strong expansion in the economy, then the EBIT will be 30% higher. If there is a recession, then EBIT will 40% lower. The company is considering a $65,000 debt issue with a 7% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 7,400...
Ghost, Inc., has no debt outstanding and a total market value of $185,000. Earnings before interest...
Ghost, Inc., has no debt outstanding and a total market value of $185,000. Earnings before interest and taxes, EBIT, are projected to be $29,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession, then EBIT will be 40 percent lower. The company is considering a $65,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of...
Ghost, Inc., has no debt outstanding and a total market value of $185,000. Earnings before interest...
Ghost, Inc., has no debt outstanding and a total market value of $185,000. Earnings before interest and taxes, EBIT, are projected to be $29,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession, then EBIT will be 40 percent lower. The company is considering a $65,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of...
SS corporation has $11M in total invested capital and its cost of capital is 10%. This...
SS corporation has $11M in total invested capital and its cost of capital is 10%. This is the company income statement: Sales $10M EBIT $4M Interest Expenses $2M EBT $2M Taxes (25%) $0.5M Net Income $1.5M Calculate EVA
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio...
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio is 35% and they are paying interest equal to 10%. The number of shares expected to be constant at 100,000 shares during the year 2020. Below you can find expected useful information for the year 2020. Economy Probability Units Sold Good 0.25 4,000 Normal 0.40   3,000 Weak 0.35 2,700 Price / Unit $ 1000 Fixed Costs $ 1,500,000 Variable cost/ Unit $ 350 Price...
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio...
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio is 35% and they are paying interest equal to 10%. The number of shares expected to be constant at 100,000 shares during the year 2020. Below you can find expected useful information for the year 2020. Economy Probability Units Sold Good 0.25   4,000 Normal   0.40 3,000 Weak 0.35 2,700 Price / Unit $ 1000 Fixed Costs $ 1,500,000 Variable cost/ Unit $ 350 Price...
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio...
Khonaysser Motors needs a total capital of $2,500,000 for its new project. The company’s debt ratio is 35% and they are paying interest equal to 10%. The number of shares expected to be constant at 100,000 shares during the year 2020. Below you can find expected useful information for the year 2020. Economy Probability Units Sold Good 0.25   4,000 Normal   0.40 3,000 Weak 0.35 2,700 Price / Unit $ 1000 Fixed Costs $ 1,500,000 Variable cost/ Unit $ 350 Price...
5) Scranton Shipyards has $11.0 million in total invested operating capital, and its Cost of capital...
5) Scranton Shipyards has $11.0 million in total invested operating capital, and its Cost of capital is 10%. Scranton has the following income statement: Sales $10.0 million (EBIT) $ 4.0 million Interest expense 2.0 million (EBT) $ 2.0 million Taxes (25%) 0.5 million Net income $ 1.5 million What is Scranton’s EVA? Explain what does it mean.
ebit and leverage ghost inc., has no debt oustanding and a total market value of $185,000...
ebit and leverage ghost inc., has no debt oustanding and a total market value of $185,000 Earnings before interest and taxes, EBIT are projected to be $29000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession , then EBIT will be 40 percent lower. The company is considering a $65000 debt issue with an interest rate of 7 percent. The proceeds will be used...
Maria Inc’s share capital consists of: 2,000 preferred shares outstanding, $6.50 per share dividend, and a...
Maria Inc’s share capital consists of: 2,000 preferred shares outstanding, $6.50 per share dividend, and a $100 stated (par) value; 5,000 common shares outstanding for which $300,000 was received. Assume that $88,000 is available for dividend distribution. Preferred shares have not been paid for the two Preceding years. Required: For each situation below, state how much of the $88,000 will be distributed to each share class. Pref erred shares are cumulative and non-participating (3 mark) Pref erred shares are cumulative...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT