Company A currently functions as an unlevered firm with 200,000 shares of stock outstanding and...
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Accounting
Company A currently functions as an unlevered firm with 200,000 shares of stock outstanding and a market price of $12 a share. The company's EBIT is $300,000.
The company borrows $500,000, at 5%.
Suppose you are an investor who currently own 10,000 shares of Company A's stock.
If you wish to unlever your position, how many shares will you continue to own, if you can loan out funds at 5 percent interest?
Ignore taxes.
Please show all working and formulas used. Explain any necessary steps.
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