Answers: Old is $4 and new is $4.35. Just need solution.

Taxes, debt, and the value of stockholders equity Suppose you have a firm with relatively little debt. You decide to borrow an additional $1 billion on a permanent basis, and repurchase shares. Corporate tax rate is 35%. The expanded balance sheet (based on the market values of securities) is: Long-term asset 5,000 M Long-term debt Equity Total Value 1,000 M 4,000 M 5,000 M Total assets 5,000 M The new expanded balance sheet: Long-term asset 5,000 M Long-term debt 2,000 M PV interest tax shield 350 M Equity 3,350 M Total Assets 5,350 M Total Value 5,350 M What is the old and new stock price if the firm had 1 billion shares before the repurchase? 163