Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value

Question

11-03-2020
Business

contestada

Dirty Don's Bicycle Shop is current financed with 100% equity. The firm currently has 100,000 shares of common stock outstanding, selling for $50 per share. Don is considering a capital restructuring project, where the firm would be financed with 45% debt and 55% equity. How many bonds would Don have to sell at par value

Respuesta :

Otras preguntas

Question 4 4 pts Lori buys a $1500 certificate of deposit (CD) that earns 6% interest that compounds monthly. How much will the CD be worth in: 5 years? 10 year

anong maling pag-uugali ng tao ang sa palagay ninyo na mahirap mabago

Which is the correct way to rewrite the following sentence fragment? Sound. Stir all over the house. A. All over the house sound and stir. B. There was sound an

Emily wants to buy a car. She has a choice between two different banks. One bank is offering a simple interest rate of 4.5% and the other bank is offering a rat

prove that: cos^2 (45+A)+cos^2 (45-A)=1

[tex]i^0 +i^1+i^2+i^3+............+i^{2021} = ?[/tex] Include work.

PLEASE HELP WILL MARK BRAINLIEST! Also please explain the answer

Describes vitamin D levels and problems

What is the effect of alcohol administration on the frequency of Daphnia heart contractions and how does this effect of alcohol change with the dose of alcohol

Select all that apply. Given the points (5, 10) and (-4,-8), which of the following are true about the line passing through these points? The line has a slope o

tallinn tallinn · Answer 1 · 2020-03-16T08:33:30+01:00

Answer:

2250

Explanation:

Assumption: Par value of the bonds to be issued is $1000

Current Capital structure is 100% equity financed of Dirty Don's Bicycle Shop.

Share capital of Dirty Don's bicycle shop = 1,00,000 shares × $50

= $5000000

After restructuring, the capital structure shall comprise of 45% debt and 55% equity.

Hence, the proportion of debt = 45% of $50,00,000 = $22,50,000

Assumed: par value of bond is $ 1000

In this case, the number of bonds to be sold = [tex]\frac{2250000}{1000}[/tex] = 2250 bonds

Thus, 2250 bonds will have to be sold at $1000.

Bonds refer to debt instruments whereby the borrower raises long term finance in exchange for making periodic coupon payments in the form of interest and principal repayment upon date of maturity.