Can you help me with the following questions, for CHAPTER 16 FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICY?
Question 3 Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $1 5 million. The interest rate on this new debt issue will be 8%, and the number of shares after the debt issue will be reduced to 500,000. Given a corporate tax rate ofdmiia. what is Notyet answered ' . . . . . . . Marked out of the EBIT that WI" cause the rm's earnings per share to be Indifferent between Issumg and not Issumg debt? 1.00 0' Flag question Select ONE: If} a. $1,200,000 O b.51.800.000 O c. $2,400,000 Q ($53,000,000 C) 8. $3,500,000 Quanlon 10 Aceline Corporation is currently all-equity nanced, with a cost of capital of 1 5% and rm value of $1 0 million. The company is considering a "myet answered $2 million debt issue at 3% interest rate. The money raised will be used to repurchase shares.The company's marginal tax rate is 32%. Marked out of According to the MSM Pro position, what is Aceline's WACC after the debt issue? 1.00 Select on e: '3, 3. 13.0991. Q h. 14.1011 0, c. 14.20% 0 d. 15.11011 '3, e. 15.1911. I? Flag questlon \fQuestion 4 Notyet answered Marked out of 1.00 I? Flag questlon Question 5 Notyet answered Marked out of 1.00 I? Flag questlon Mrs. Abecrombus has $2,000 to invest. There are only two possible lnveshnents: a levered rm with a DIE ratio OH and a share price of $20, and a risk-free asset with a return of 10%. If Mrs. Abecrombus prefers a DIE ratio of2, how can she use homemade leverage to achieve her goal? Select one: Q a. borrow 52,000 at the riskfree rate and buylr 200 shares O b. lend $2,000 at the riskfree rate and sell 100 shares CI c. lend 51,000 at die riskfree rate and sell 50 shares 0 d. borrow $1,500 at the riskfree rate and buy 'l?5 shares CI e. borrow $1,000 at die risk-free rate and buy 150 shares Async Inc. and Sync Corp. bod": have the same EBIT of $3 million and tax rate of30'iila. Async is allequity nanced with a cost of capital of 12%, whereas Sync has debt of $15 million. What is Sync's rm value using the MGM Proposition? Select one: Q a. $15,250,000 b. $17,500,000 c. 519350.000 d. $25,000,000 I, ,I e. $3,250,000 3 z- I I \\_ '\\ )( Quuorl 7 You are a business analyst with a big investment bankr and you are evaluating the equity risk, business risk, and nancial risk of Abilon's Inc. "Myer \"Ml-ed You went online and found that the industry consensus on Abilon's equity risk is 1.5. You also know that the company's debtequity ratio is Marked out of 2. What is Abilon's estimated business and nancial risk based on the model: [SE = B M1 + DIE}? 1.00 Select one: C: a. {15:1 Q b.o.5;2 Cl C. 1: 2 O (1.2; 3 C: e. 2; 4 '7 Flag
