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Cost of Equity Chapter 12 Capital Structure Data Core Inc has an all equity capital structure. However, the firm is considering a recapitalization that would

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Cost of Equity Chapter 12 Capital Structure Data Core Inc has an all equity capital structure. However, the firm is considering a recapitalization that would structure the firm with 25% debt and 75% equity by issuing an appropriate amount of debt and repurchasing an equal amount of common stock, the debt is expected to have a 5% coupon rate, the following scenarios are firm's EBIT: Outlook Good Average Poor Probability 35% 40% 25% | EBIT $800,000 $525,000 $75,000 The firm currently has 200,000 shares of common stock outstanding at $43 per share, and not subject to tax. . Interest Capel coupon rale ? 2. soooo x 5%: 1071500 Shares 01 When the 56-year old founder of Gulf and Western Inc, died of a heart attack, the stock price immediately jumped from $18.00 a share to $20.25, a 12.5 percent increase. This is evidence of market inefficiency because an efficient stock market would have anticipated his death and adjusted the price beforehand. Assume that no other information is received and the stock market as a whole does not move Is this statement about market efficiency true or false? Cost of Equity Chapter 12 Capital Structure Data Core Inc has an all equity capital structure. However, the firm is considering a recapitalization that would structure the firm with 25% debt and 75% equity by issuing an appropriate amount of debt and repurchasing an equal amount of common stock, the debt is expected to have a 5% coupon rate, the following scenarios are firm's EBIT: Outlook Good Average Poor Probability 35% 40% 25% | EBIT $800,000 $525,000 $75,000 The firm currently has 200,000 shares of common stock outstanding at $43 per share, and not subject to tax. . Interest Capel coupon rale ? 2. soooo x 5%: 1071500 Shares 01 When the 56-year old founder of Gulf and Western Inc, died of a heart attack, the stock price immediately jumped from $18.00 a share to $20.25, a 12.5 percent increase. This is evidence of market inefficiency because an efficient stock market would have anticipated his death and adjusted the price beforehand. Assume that no other information is received and the stock market as a whole does not move Is this statement about market efficiency true or false

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