A trader enters into a short forward contract on 100 million yen. The forward exchange rate is$0.0090 per yen. How much does the
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Answer:
The solution as per the given problem is provided below throughout the explanation portion below.
Explanation:
The given values are:
Debt issued,
= 120
Pretax earnings,
= 80
Tax,
= 35%
All equity firm,
= $320
Number of common stock,
= 50
(a)
Balance sheet before the debt issue's announcement will be:
<u>Assets </u><u> 320</u>
<u>Debt </u><u> 0</u>
<u>Equity </u><u> 320</u>
then,
The total will be "320".
(b)
The per share price will be:
=
=
=
or,
After tax, the net income will be:
=
=
=
=
(c)
The return on equity will be:
=
=
=
or,
= (%)