Question:Lara’s Inc. is currently an unlevered firm with 450,000 shares
of stock outstanding, with a market...
Question
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 can loan out funds at 5 percent interest?
Ignore taxes in your deliberations. Kindly show all workings.