Question
3) The price per share of your all-equity firm is $30, and there are 2M shares outstanding. Suppose that your firm issues $20M worth of
3) The price per share of your all-equity firm is $30, and there are 2M shares outstanding. Suppose that your firm issues $20M worth of debt. The debt has a face value of $20M, a coupon rate of 5 percent per year, and 15 years until maturity. The expected return on this debt is 5 percent. Assume a tax rate of 40 percent. What is the new price per share after issuing this debt?
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Financial Management For Public Health And Not For Profit Organizations
Authors: Steven A. Finkler
2nd Edition
0131471988, 978-0131471986
