Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

River Cruises is all - equity - financed with 1 0 0 , 0 0 0 shares. It now proposes to issue $ 1 5

River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $150,000 of debt at an interest rate of 10% and use the proceeds to repurchase 15,000 shares at $10 per share. Profits before interest are expected to be $115,000.
A. What is the ratio of price to expected earnings for River Cruises before it borrows the $150,000?
Note: Do not round intermediate calculations.
B.What is the ratio after it borrows?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information Systems Assurance

Authors: David C Chan

2nd Edition

150081458X, 9781500814588

More Books

Students also viewed these Finance questions

Question

Describe global employee and labor relations practices.

Answered: 1 week ago