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slava [35]
2 years ago
13

You currently own 900 shares of JKL which is an all-equity firm with 250,000 shares of stock outstanding at a market price of $4

0 a share. The company's earnings before interest and taxes are $120,000. JKL has decided to issue $1 million of debt at 6.5 percent interest and use the proceeds to repurchase shares of stock. How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 6.5 percent interest
Business
1 answer:
Wittaler [7]2 years ago
3 0

Answer:

90 shares

Explanation:

Calculation to determine How many shares of JKL stock must you sell to unlever your position if you can loan out funds at 6.5 percent interest

First step is to calculate Your initial investment

Your initial investment = 900 x $40

Your initial investment = $36,000

Second step is to calculate JKL value of stock

JKL value of stock = [250,000 - ($1M/$40)] x $40 JKL value of stock = $9M

Third step is to calculate JKL Total value

Value of Debt = 1M

JKL Total value = 9M + 1M

JKL Total value = 10M

Fourth Step is to calculate You new stock position

JKL Wight Stock = 9M/10M = 9/10

You new stock position = [9/10($36,000)]/10

You new stock position= $32,400/40

You new stock position=810 shares

Now let calculate the Number shares sold

Number shares sold = 900 Shares - 810 Shares

Number shares sold = 90 shares

Therefore the numbers or shares of JKL stock that must you sell to unlever your position if you can loan out funds at 6.5 percent interest is 90 shares

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We can arrive at this answer because:

  • The Behavior Analyst needs to show that he tried to contact the customer and show that he is interested in contacting him again.
  • For this reason, he shows that the customer can get in touch with him, leaving the business card, with the contact forms.
  • To make this contact more professional and thus increase the credibility of the service, the Behavior Analyst leaves the name of the person to be served and the service that will be provided.

This type of behavior shows commitment to customer service, which gives the Behavior Analyst credibility and increases the chances of a contract.

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2 years ago
Fitzgerald Tech owns 20,000 shares of Buchanan Industries, which it purchased for $450,000 in 2016. On March 6, 2020, Fitzgerald
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The debit to the retained earning should be $750,000 for this transaction because that is the market value of the asset to be distributed as dividend.

Explanation:

Property dividend is a form of dividend payout that involves distribution of company`s assets to equity holders as a form of return. These assets can be inventory, marketable securities or investment in a subsidiary.

For this distribution to be formal, it must be approved by the board of directors of the company. After approved and declared, the accounting entries can now be passed.

The accounting entries needed are:

Debit: Retained Earnings with the amount of the asset distributed.

Credit: Dividend Payable with the amount of the asset distributed.

It is important to note that  the market value of asset to be distributed should be considered i.e the market value of the asset must be recognized in the book. The difference in book value and market value of the investment will be recognized in respective asset ledger account prior transfer to retained earnings.So that the market value of the investment is recognized on the debit side of retained earnings

In the case of Fitzgerald, $750,000 will be debited to retained earnings since it is the market value of the asset to be distributed.

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Spectra Scientific of Santa Clara, California, manufactures Q-switched solid-state industrial lasers for LED substrate scribing
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The <u>amount of the unrecovered balance</u> immediately before Spectra Scientific of Santa Clara, California made the first payment at the end of year 1 is $49,680,000.00.

<h3>What is future value?</h3>

The unrecovered amount is the future value of the loan at the end of year 1 after the first year's interest has been added, and before subtracting the first payment.

The future value can be computed using the Future Value Formula below or an online finance calculator as follows:

<h3>Future Value Formula:</h3>

FV = PV(1+r)^{n}

FV = future value

PV = present value

r = annual interest rate

{n} = number of periods interest held

<h3>Data and Calculations:</h3>

N (# of periods) = 6 years

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Thus, the <u>amount of the unrecovered balance</u> immediately before Spectra Scientific of Santa Clara, California made the first payment at the end of year 1 is $49,680,000.00.

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<h3>Learn more</h3>
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<h3>Answer details</h3>

Grade:  9

Subject:  

Chapter: ratification

Keywords:  ratification

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