ABC Corp. is going through a dissolution. It has assets of $12.8 million and outstanding debt...

ABC Corp. is going through a dissolution. It has assets of $12.8 million and outstanding debt of $14.6 million owed to its bondholders and other creditors. How much will the common stockholders receive and how much will the creditors receive? Explain.

Expert Solution

Dear Reader,

The concept of distribution of funds in case of dissolution is used in the solution.

Happy Reading ✌️

Stay Safe!!

jeff jeffy answered 1 year ago

Avicorp has a $12.8 million debt issue outstanding, with a 5.9% coupon rate. The debt has...

Avicorp has a $12.8 million debt issue outstanding, with a 5.9% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93% of par value. **Answer MUST be rounded to FOUR decimal places** a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. ROUND TO 4 DECIMAL PLACES b. If Avicorp faces a 40% tax rate, what is its...

ABC Corporation has $100 million in debt outstanding. The debt has 4 years to maturity and...

ABC Corporation has $100 million in debt outstanding. The debt has 4 years to maturity and a 6% coupon. The debt has a par value of $1,000 per bond and interest is paid semi-annually. The current price of the bond is 105.25 as a percent of par. The company has 10 million of stock outstanding with a market price of $25 per share. The stock has a beta of 1.24 with the market. The company is in the 25% tax...

ABC Corp. debt is P15 million and has an equity of P5 million. Its historical levered...

ABC Corp. debt is P15 million and has an equity of P5 million. Its historical levered equity beta has been 2. If the firm were to increase its leverage from P15 million to P18 million and use the cash to repurchase shares, what would you expect its levered equity beta to be

Currently, ABC Corp. has as market capitalization of $400 million and a market value of debt...

Currently, ABC Corp. has as market capitalization of $400 million and a market value of debt of $150 million. The current cost of equity for ABC Corp. is 12% and its current cost of debt is 5%. Assume perfect capital markets (no taxes, no market frictions). You are trying to assess how different transaction would affect the cost of equity. A) Suppose ABC issues $150 million of new equity and buys back the debt it currently has outstanding. What is...

ABC has $5 billion in debt outstanding (carrying an interest rate of 9%), and 10 million...

ABC has $5 billion in debt outstanding (carrying an interest rate of 9%), and 10 million shares trading at $50 per share. Based on its current EBIT of $ 200 million, its optimal debt ratio is only 30%. The firm has a beta of 1.20, and the current T-bond rate is 7%. Assuming that the operating income will increase 10% a year for the next five years and that the firm's depreciation and capital expenditures both amount to $ 100...

Acme Corp has a target debt/equity ratio of 0.35. It was $350 million in bonds outstanding...

Acme Corp has a target debt/equity ratio of 0.35. It was $350 million in bonds outstanding with a yield of 7% and 50 million shares of stock outstanding with a current market price of $20 per share. The company’s beta is 1.32 and the risk-free rate of interest is 4% with a market risk premium of 6%. The firm has a tax rate of 25%. The company is looking to raise $250 million to build a second factory. The new...

1. ABC Corp. has earnings of $15 million per year and 300,000 shares outstanding. If other,...

1. ABC Corp. has earnings of $15 million per year and 300,000 shares outstanding. If other, similar firms in the industry have price/earnings ratios of around 6, what is the estimated stock value of ABC Corp.? 2. Fill in the blank with the correct term below the definition: 1.) Type of bond which is selling at a price below its face value. _________________ 2.) Type of bond which is selling at a price above its face value. _________________ 3.) Type...

11: Sue owns 2000 shares of the 20 million outstanding common shares of ABC Corp. ABC...

11: Sue owns 2000 shares of the 20 million outstanding common shares of ABC Corp. ABC stockholders have preemptive rights. Now, ABC decides to sell 2 million new common shares through a rights offering. How many rights will Sue receive? a. 200 b. 0.20 c. 0.10 d. 20 18: Suppose we employ a "price-weighted" methodology to construct and track a two-stock index based on Stocks X and Y. Stock X has an initial...

ABC Ltd currently has $300 million of market value debt outstanding. The 9 per cent coupon...

ABC Ltd currently has $300 million of market value debt outstanding. The 9 per cent coupon bonds (semiannual payment) have a maturity of 15 years and are currently priced at $1,440.03 per bond. The company also has an issue of 2 million preference shares outstanding with a market price of $12.00. The preference shares offer an annual dividend of $1.20. ABC also has 14 million ordinary shares outstanding with a price of $20.00 per share. The company is expected to...

Avicorp has a $12.3 million debt issue outstanding, with a 6.2% coupon rate. The debt has...

Avicorp has a $12.3 million debt issue outstanding, with a 6.2% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 95% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able...

Question