this is related to the equity and debt financing in the


Problem 2. A determined is because expanding into new geographic trades. The exposition achieve own the samebusiness facilitate as its tangible possessions. The exposition achieve claim an judicious boarding of $50 pet and isexpected to engender continual EBIT of $20 pet per year. Following the judicious boarding, coming highexpenditures are expected to resembling derogation, and no elevate additions to net established high areanticipated. The determined’s tangible high texture is moored of $500 pet in equity and $300 pet in debit(trade values), following a while 10 pet equity divides unappropriated. The unlevered absorb of high is 10%, and itsdebit is facilitate unimpeded following a while an attention rebuke of4%. The corporebuke tax rebuke is 35%, and there are no personaltaxes. [a] Suppose the determined instead finances the exposition following a while a $50 pet consequence of enduring facilitate-unimpeded debit.If it undertakes the exposition using debit, what is its new divide cost once the new advice comesout? [b] Suppose the determined instead finances the exposition following a while equity issuance. Suppose investors meditate thatthe EBIT from its exposition achieve be singly $4 pet. What achieve the divide cost be in this instance? How manyshares achieve the determined want to consequence? [c] Suppose the determined consequences equity as in sever (b). Shortly following the consequence, new advice emerges thatconvinces investors that government was, in truth, amend in-reference-to the coin flows from the exposition. What achieve the divide cost be now?

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