Question
Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15%
Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets.
a. What is the firm's WACC?
b. Suppose GP issues $100 million of new stock to buy back the debt. What will be the market value of its equity after this transaction?
c. Suppose instead GP issues $50 million of new debt to repurchase stock. If the risk of the debt does not change, what will be the market value of its equity after this transaction?
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Grow Your Small Business Profits How I Find A 100K In Any Business In 45 Minutes
Authors: Sharon Coleman
1st Edition
B0C9S9CCZJ, 979-8850917258
