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Lance owns 200 shares of ABC stock with a current market value of $10 a share. ABC has an annual EBIT of $400,000 and a
Lance owns 200 shares of ABC stock with a current market value of $10 a share. ABC has an annual EBIT of $400,000 and a cost of debt of 8%. Currently, ABC is 100% equity financed with 100,000 shares outstanding. ABC is going to a 25% debt capital structure by issuing debt and redeeming shares. Ignore taxes. What does Lance have to do to return his capital structure position to approximately its original position?
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