I hold 100 shares in company A, which are 10% of the outstanding shares. The company has
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I hold 100 shares in company A, which are 10% of the outstanding shares. The company has an unlevered cash flow equal to $1,000,000. At the moment the company is unlevered, but the management has just decided to go through with a recapitalization in order to have a debt-to-value ratio of 20%. There is no taxation and assume the Miller Modigliani assumptions hold true. Since you would still want to receive the unlevered cash flow even after the recapitalization, which trading strategy would you adopt after the recapitalization?
Related Book For
Corporate Finance
ISBN: 9781265533199
13th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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