True or False: To get the best outcome while trying to reach a financial goal, you should estimate the cost of the goal and how
2 answers:
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Answer:
Number of Shares Sold= 125
so correct option is C. 125 shares
Explanation:
given data
stock outstanding = 50,000 shares
market price = $40
interest and taxes = $142,000
debt = $500,000
interest = 6 percent
own = 500 shares
to find out
How many shares of Miller's stock must you sell
solution
we get here shares repurchased that is express as
shares repurchased =
shares repurchased = $12500
and
no of Shares Outstanding with Debt will be
no of Shares Outstanding with Debt = $50000 - $12500
no of Shares Outstanding with Debt = $37500
and
Value of Stock will be
Value of Stock = $37500 × $40
Value of Stock = $1500000
and
now Total Value will be
total value = $500000 + $1500000
total value = $2000000
so Weight of Debt is here
Weight of Debt =
Weight of Debt = 0.25
so Weight of Stock is
Weight of Stock =
Weight of Stock = 0.75
so
Initial Investment is = 500 × 40
Initial Investment = $20000
and
Value on New Stock Position will be
Value on New Stock Position = 0.75 × $20000
Value on New Stock Position = $15000
so
New Shares is =
New Shares is = 375
and
Number of Shares Sold will be
Number of Shares Sold = 500 - 375
Number of Shares Sold= 125
so correct option is C. 125 shares