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7. Debt Irrelevance. Digital Fruit is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share.

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7. Debt Irrelevance. Digital Fruit is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. There are no taxes. (LO16-I) a. What is the expected market price of the common stock after the announcement? b. How many shares can the company buy back with the $160 million of new debt that it will issue

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