Answered

Welcome to Westonci.ca, the Q&A platform where your questions are met with detailed answers from experienced experts. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

The Greenbriar is an all-equity firm with a total market value of $539,000 and 21,300 shares of stock outstanding. Management is considering issuing $137,000 of debt at an interest rate of 10 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares will the firm repurchase if it issues the debt securities

Sagot :

Answer:

5,413 shares

Explanation:

The computation of the no of shares repurchased is given below;

Market Price per Share

= Existing market Value of Firm ÷ Number of Shares Outstanding

= $539,000 ÷ 21,300 Shares

= $25.31 per share  

Now

Total number of shares that can be redeemed

= Total Debt Issued ÷ Market Price per share

= $137,000 ÷ $25.31 per Share

= 5,413 shares

We appreciate your visit. Hopefully, the answers you found were beneficial. Don't hesitate to come back for more information. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. We're glad you visited Westonci.ca. Return anytime for updated answers from our knowledgeable team.