Question
An all equity firm, worth $10 million dollars, currently has 10000 shares valued at $1000 a share. If the company wishes to retain the same
An all equity firm, worth $10 million dollars, currently has 10000 shares valued at $1000 a share. If the company wishes to retain the same cash flows from operating income, but wants the company to restructure to be 75% equity and 25% debt, how much stock must they repurchase through bonds? What will their share price be after bond issuance?
A. $2,500,000 bond issuance, the stock price is now $750
B. $250,000 bond issuance, the stock price is now $10000
C. $250,000 bond issuance, the stock price remains at $1000
D. $2,500,000 bond issuance, the stock price remains at $1000
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