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Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs. Suppose that at the start
Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs. Suppose that at the start of the year, MI has no debt outstanding, but has 5.6 million shares of stock outstanding. If MI issues debt of K125 million due next year and uses the proceeds to repurchase shares. Required: What will be the share price of MI after the announcement
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