- Suppose That The Matrix Corporation Has 120 Million Of Assets All Financed With Equity And That The Form Has 6 Millio 1 (46.13 KiB) Viewed 59 times
- Suppose That The Matrix Corporation Has 120 Million Of Assets All Financed With Equity And That The Form Has 6 Millio 2 (27.98 KiB) Viewed 59 times
suppose that the Matrix corporation has $120 million of assets, all financed with equity, and that the form has 6 million shares of stock outstanding valued at $40 per share, suppose that management has identified investment opportunities requiring $60 million of new funds and can raise the funds in one of the following three ways: Financing package 1: Issue $60 million equity (3,000,000) shares of stocks at $40 per share) • Financing package 2: Issue $30 million equity (1,500,000) shares of stocks at $40 per share), and borrow $30 million with an annual interest rate 8% • Financing package 3: Borrow $60 million with an interest of 8%. a. Complete the following table for each financing package after the financing capital structure is completed: - Debt Equity No. of Shares Debt-equity ratio Debt-to- Financing package Assets Asset ratio 2 3
b. Suppose the Matrix Corporation has $27 million of operating earings. Show that the firm's return on assets is 15% c. compute the earnings per share for the three financing packages by completing the table below: Financing packages 2. Operating earnings in millions - Interest expense in million = Earnings available to owners in millions No. of shares in millions Earnings per share