An all equity firm has a market value of $400,000 with 40,000 shares of stock. They...
- An all equity firm has a market value of $400,000 with 40,000 shares of stock. They are looking at changing their structure to include $100,000 in debt.
1. What is the current share price?
2. How many shares will $100,000 buy?
3. How many shares will remain after the capital change?
|
1. 10 2. 10,000 3. 40,000 |
||
|
1. 40 2. 2,500 3. 37,500 |
||
|
1. 10 2. 10,000 3. 30,000 |
||
|
1. 10 2. 10,000 3. 0 |
Homework Answers
1. Current Share Price =Market Value/Number of shares
=400000/40000 =10
2. Number of shares =Debt/Share Price =100000/10 =10000
3. Number of Shares after buy back =Number of shares initially
-Number of shares used for debt =40000-10000 =30000
Option c is correct option
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