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topjm [15]
3 years ago
9

Suppose a company is financed with $20 million of equity and $60 million of debt. That is, the company obtained $20 million from

shareholders and $40 million from debtholders to finance its operations. Its capital structure is, therefore, 25% (=$20million/ ($20 million+$60 million) ) equity and 75% (=$60million/ ($20 million+$60 million) ) debt. Please provide the solutions to the following questions (a, b) in the box below.
If company issues $30 million new equity in order to retire some of its debt, what would be its new capital structure?
How do you think market would react on the announcement about the new equity issue? Why? Explain.
Business
1 answer:
alexgriva [62]3 years ago
6 0

Answer:

Existing Equity = 20 million

Existing debt = 60 million

Total capital = 20 million + 60 million = 80 million

a. Given company issued 30 million of equity to retire debt

Equity after raise = $20 million + $30 million = $50 million

Debt = $60 million - $30 million = $30 million

Total capital size remain at $80 million

Capital structure, Equity = $50 million/$80 million = 0.625 = 62.50%

Debt = (1-0.625) = 0.375 = 37.50%

b. The market would welcome the new issue as the risk of  the firm would be reduced.

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4 0
3 years ago
to obtain approval for the scope document, the project manager will do which of the following activities? a.) review input from
OlgaM077 [116]

To obtain approval for the scope document, the project manager will interview input from key stakeholders to determine if the scope needs additional changes.

A scope document is simply a piece of formal documentation which is outlining both product scope and as well as the project scope. Before diving into a new project, the project manager and his team and any other stakeholders will need to agree on the scope of the project.

So, it is the responsibility of one of the project manager to ensure that only the needed work will be performed and that each of the deliverables can be completed in the allotted time and within the estimated budget.

Hence, option A is correct.

To learn more about the scope document here:

brainly.com/question/15229575

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6 0
1 year ago
Goods or services in standard-cycle markets reflect: a. numerous first-mover advantages. b. organizations that serve a mass mark
kogti [31]

Answer:

Option b.

Explanation:

In standard cycle, competitive actions are designed to serve large market shares, to gain customer loyalty and to control the firm's operations which in turn provide the same positive experience to customers.

Goods or services in standard-cycle markets reflect <u>organizations that serve a mass market.</u>

Standard-cycle markets refer to the markets where the firm's competitive advantages are shielded from imitation such that those advantages can be sustained longer but for a shorter period.

These advantages can be sustained for longer period in a slow-cycle market  than in fast-cycle markets.

Competitive advantages are sustainable in slow-cycle as these are shielded from imitation for longer periods of time such that imitation is costly.

Option b. is correct

5 0
3 years ago
Economists expect the firm to maximize __________, the laborer to accept the best __________, and the consumer to find the combi
algol13

Answer:

The correct answer is option d.

Explanation:

The firms are expected to maximize profits, the laborers are expected to accept the best offer and the rational consumer is expected to choose the bundle of good that maximizes utility.

Firms will produce the output level where their profits are maximized. The consumer will consume at the level where their total utility is maximized and the laborer will accept the best offer to maximize his benefit.

7 0
3 years ago
Read 2 more answers
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,470,000, $154,000 in the common stock account
devlian [24]

Answer:

The cash flow to creditors during 2014 was $139000,the amount by which net working capital investment has reduced.

The stockholders invested $241,000 more into the business

The net cash flows from asset is the $1,100,000 net firm's capital spending

Lastly,the operating cash flow is $240,000 as calculated below

Explanation:

Net working capital investment denotes the amount of cash the company parted with in 2014 in financing its current obligations.

Stockholders as the owners of the company made more cash available to the company in 2014 by investing more cash resources in it as follows:

Common stock account increased by $10000($164000-$154000)

Additional paid-in surplus increased by $300000($3090000-$2790000)

The gives $400000 cash from stockholders minus dividends of $159000

Operating cash flow

Net income                                    $0

add interest                                   $101000

Reduction in net working capital $139000

Operating cash flow                     $240000

6 0
3 years ago
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