Executive Chalk is financed solely by common stock and has outstanding 43 million shares with a market price of $46 a share. It now announces that it intends to issue $690 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?

b. How many shares can the company buy back with the $690 million of new debt that it issues? (Enter your answer in millions.)

c-1. What is the market value of the firm (equity plus debt) after the change in capital structure? (Enter your answer in millions.)

c-2. Did the market value of the firm change?

d. What is the debt ratio after the change in structure? (Round your answer to 2 decimal places.)

e. Who (if anyone) gains or loses?

a	Effect on market price	Stock price decrease/ increase/ or stock price remains the same
b	Shares repurchased	million
c-1	Market value	million
c-2	Did the market value of the firm change?	No or Yes
d	Debt ratio
e	Who (if any one) gains or loses?	No one gains or loses/ Debtholders gain and shareholders/ Shareholders gain and debtholders lose/ or Shareholders gain and no one loses