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Executive Chalk is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces
Executive Chalk is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. a. How is the market price of the stock affected by the announcement? Please explain in detail why. b. Who (if anyone) gains or loses? Please explain in detail why. |
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