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ra1l [238]
3 years ago
12

Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding

, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value
Business
1 answer:
Vlad [161]3 years ago
6 0

Answer:

2250

Explanation:

Assumption: <u>Par value of the bonds to be issued is $1000 </u>

Current Capital structure is 100% equity financed of Dirty Don's Bicycle Shop.

Share capital of Dirty Don's bicycle shop = 1,00,000 shares × $50

                                                                                        = $5000000

After restructuring, the capital structure shall comprise of 45% debt and 55% equity.

Hence, the proportion of debt = 45% of $50,00,000 = $22,50,000

Assumed: par value of bond is $ 1000

In this case, the number of bonds to be sold = \frac{2250000}{1000} = 2250 bonds

Thus, 2250 bonds will have to be sold at $1000.

Bonds refer to debt instruments whereby the borrower raises long term finance in exchange for making periodic coupon payments in the form of interest and principal repayment upon date of maturity.

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For a stock to be in equilibrium, two conditions are necessary: (1) The stock's market price must equal its intrinsic value as s
nevsk [136]

Answer:

True

Explanation:

For a stock to be in equilibrium, two conditions are necessary:

(1) The stock's market price must equal its intrinsic value as seen by the marginal investor;

(2) the expected return as seen by the marginal investor must equal his or her required return.

4 0
3 years ago
On average, LB Inc. receives 138 payments each day with an average value of $42 each. These payments clear the bank in an averag
Oxana [17]

Answer: c) $7,535

Explanation:

The Collection Float refers to the time that it takes for a deposited check to become available to the account owner after the check has been deposited.

The Average amount is calculated thus;

= No. of payments * Clearing days * average value of payment

= 138 * 1.3 * 42

= $7,535

6 0
2 years ago
Which is the most accurate definition of body language?
boyakko [2]

Answer:

b

Explanation:

b

4 0
2 years ago
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Brian had the following items of income this year. • Salary - $22,000 • Child support received - $6,000 • Alimony received - $10
SashulF [63]

Answer:

$82000

Explanation:

Gross income is defined as the total sum of money received (salary, wages, rents, interests and other form of earnings) that an individual or a household receive before any deductions or taxes. Hence,

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The child support and compensatory damages are not added because they are not taxable.

4 0
3 years ago
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Scribners Corporation produces fine papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Depart
Arlecino [84]

Answer:

a. costs of production  Pulping: 165000  conversion: 159000

b. Cost per equivalent unit Pulping: 0.65 conversion: 0.20

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d. Cost of reconciliation:

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8 0
3 years ago
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