Question
A company has EBIT of $100,000 and $1,000,000 of Debt at Kd = 4% and a 30% tax rate. They issue $500,000 of additional debt
A company has EBIT of $100,000 and $1,000,000 of Debt at Kd = 4% and a 30% tax rate. They issue $500,000 of additional debt at Kd = 5%. If they replace the old debt their NEW NPAT is:
| A. | $17,500 | |
| B. | $25,000 | |
| C. | $24,500 | |
| D. | $35,000 |
A firm issues $1,000,000 of additional debt, and uses the proceeds to repurchase equity. Equity falls from $5,000,000 to $4,400,000. They originally had 100,000 shares of stock. The new stock price should be:
| A. | $44 | |
| B. | $54 | |
| C. | $60 | |
| D. | $34 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The New Public Finance
Authors: Inge Kaul, Pedro Condeicao
1st Edition
0195179978, 978-0195179972
