ABC Ltd is an all equity-financed company with a cost of capital of 16 per cent. The current market value of the company is ₹1 billion, and it has 10 million shares outstanding. It has plans to issue ₹200 million debt at 10 per cent interest. The company intends to use the proceeds to repurchase shares of its own stock.

a. What is likely to happen to the price of ABC Ltd stock?

b. How many shares will be outstanding after the repurchase plan is completed?

c. What will be the cost of equity and the cost of capital?