Question
A firm has a total value of $1,350 and permanent debt of $500. It operates in a country with a tax rate of 30% in
A firm has a total value of $1,350 and permanent debt of $500. It operates in a country with a tax rate of 30% in a semi-strong form efficient market. It currently has 270 shares outstanding. The CFO has decided that she would like to issue new equity to repurchase all of the firms outstanding debt, thus becoming unlevered.
A) What will be the value of the firm after this transaction?
B) What would be the share price after the restructure? How many shares will there be in the firm after the restructure?
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Family Matters Making The Right Financial Decision For Your Filipino Family
Authors: Belen Loreto Grand
1st Edition
1683509544, 978-1683509547
