Martin and sons m and s currently is an all equity firm, Ask an Expert

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Martin and Sons (M and S) currently is an all equity firm with 48,000 shares of stock outstanding at a market price of $25 a share. The company's earnings before interest and taxes are $82,000. M and S has decided to add leverage to their financial operations by issuing $360,000 of debt with a 7% percent interest rate. This $360,000 will be used to repurchase shares of stock. You own 2,300 shares of M and S stock. You also loan out funds at a 7% percent rate of interest. How many of your shares of stock in M and S must you sell to offset the leverage that the firm is assuming? Assume that you loan out all of the funds you receive from the sale of your stock.

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