Pay-day banks inc is a short-term lender pay-day is all, Ask an Expert

Finance

Pay-Day Banks Inc. is a short-term lender. Pay-Day is all equity financed. Pay-Day has 20 million shares outstanding which trade for $7 per share. Pay-Day's shareholders require a return of 9%.

Cash-Mart Financial is also a short-term lender. It's shares are trading for $15 per share. Cash-Mart has 10 million shares outstanding. Cash-Mart's corporate bonds are rated BB and are trading for 87.5% of face value to yield 7%. The face value of Cash-Mart's debt is $100 million.

What is the required return of Cash-Mart's shareholders? (Assume that the tax rate is 0%.) A). 10.17% B) 10.25% C) 10.33% D) 10.50% E) 10.67%.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92308365

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