Question

Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market...

  1. Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market price of $15 a share. The company has earnings before interest and taxes of $314,000. Lara's met with his bankers, Warne Incorporated and agreed to borrow $825,000, at 5 percent. You are an ardent investor and you currently own 20,000 shares of Lara's stock. If you seek to unlevered your position; how many shares of Lara's stock will you continue to own, if you can loan out funds at 5 percent interest? Ignore taxes in your deliberations. Kindly show all workings.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market...
Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market price of $15 a share. The company has earnings before interest and taxes of $314,000. Lara's met with his bankers, Warne Incorporated and agreed to borrow $825,000, at 5 percent. You are an ardent investor and you currently own 20,000 shares of Lara's stock. If you seek to unlevered your position; how many shares of Lara's stock will you continue to own, if you...
Domino, Inc. is an unlevered firm with a total market value of $5,880,000 with 200,000 shares...
Domino, Inc. is an unlevered firm with a total market value of $5,880,000 with 200,000 shares of stock outstanding. The firm has expected EBIT of $414,000 if the economy is normal and $760,000 if the economy booms. The firm is considering a $2,000,000 bond issue with an attached interest rate of 6.2 percent. The bond proceeds will be used to repurchase shares. Ignore taxes. What will the earnings per share be after the repurchase if the economy booms?
Ventec is an unlevered firm with a total market value of $5,320,000 with 420,000 shares of...
Ventec is an unlevered firm with a total market value of $5,320,000 with 420,000 shares of stock outstanding. The firm has expected EBIT of $400,000 if the economy is normal and $700,000 if the economy booms. The firm is considering a $2,200,000 bond issue with an attached interest rate of 6.3 percent. The bond proceeds will be used to repurchase shares. Ignore taxes. What will the earnings per share be after the repurchase if the economy booms?
Miller's Dry Goods is an all equity firm with 50,000 shares of stock outstanding at a...
Miller's Dry Goods is an all equity firm with 50,000 shares of stock outstanding at a market price of $60 a share. Miller's has decided to add leverage to its financial operations by issuing $300,000 of debt at 8 percent interest. The debt will be used to repurchase shares of stock. You own 400 shares of Miller's stock. You also loan out funds at 8 percent interest. How many shares of Miller's stock must you sell to offset the leverage...
You currently own 800 shares of JKL, Inc. JKL is an all equity that has 700,000...
You currently own 800 shares of JKL, Inc. JKL is an all equity that has 700,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $5,600,000. You believe that the JKL should finance 50 percent of assets with debt, but management refuses to leverage the company. Given that similar firms' pay 4 percent interest on their debt, answer the following questions. Part A: How much money should you borrow...
JohnSmith Engineering is currently unlevered with 2,000 shares outstanding and assets valued at $50,000. The company...
JohnSmith Engineering is currently unlevered with 2,000 shares outstanding and assets valued at $50,000. The company expects operating income(EBIT) in the current period to be $4,000. Suppose that the company can exchange 400 shares of stock for $10,000 in debt paying 10% interest. Assume no taxes. a. From the standpoint of EPS, would the exchange be wise? b. What is the break-even EBIT?
Northeast Lobster currently has 19,900 shares of stock outstanding. It is considering issuing $184,000 of debt...
Northeast Lobster currently has 19,900 shares of stock outstanding. It is considering issuing $184,000 of debt at an interest rate of 7.5 percent. The break-even level of EBIT between these two capital structure options is $133,000. For this to be true, what is the current stock price? Ignore taxes.
You currently own 8 percent of the 200,000 shares of outstanding stock in Jones, Inc. The...
You currently own 8 percent of the 200,000 shares of outstanding stock in Jones, Inc. The firm has announced it is offering an additional 40,000 shares to the public. What will your new ownership position be if you opt to not participate in the additional stock offering? Assume the issue is fully subscribed. 6.67 percent
Northeast Lobster currently has 18,400 shares of stock outstanding. It is considering issuing $94,000 of debt...
Northeast Lobster currently has 18,400 shares of stock outstanding. It is considering issuing $94,000 of debt at an interest rate of 6.2 percent. The break-even level of EBIT between these two capital structure options is $73,000. For this to be true, what is the current stock price? Ignore taxes. $70.08 $60.79 $67.04 $63.99 $73.13
Northwestern Lumber Products currently has 24,500 shares of stock outstanding. Patricia, the financial manager, is considering...
Northwestern Lumber Products currently has 24,500 shares of stock outstanding. Patricia, the financial manager, is considering issuing $177,000 of debt at an interest rate of 7.8 percent. Given this, how many shares of stock will be outstanding once the debt is issued if the break-even level of EBIT between these two capital structure options is $79,000? Ignore taxes. Multiple Choice 17,330.05 shares 21,903.26 shares 19,207.47 shares 18,870.50 shares 20,218.39 shares
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT