Question
ABC Co. is financed 100% by common stock and has outstanding 20 million shares with a market price of $30 a share. It announces that
ABC Co. is financed 100% by common stock and has outstanding 20 million shares with a market price of $30 a share. It announces that it intends to issue $150 million of debt and to use the proceeds to buy back common stock. What is the market value of the firm (equity plus debt) after the change in capital structure?
Selected Answer: 60000000 Response Feedback: Incorrect. Firm value = Debt + Equity.
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The Risk Modeling Evaluation Handbook Rethinking Financial Risk Management Methodologies In The Global Capital Markets
Authors: Greg Gregoriou, Christian Hoppe, Carsten Wehn
1st Edition
0071663703, 978-0071663700
