Question
Payday Inc.wants to issue $2 million of debt @ 5% to either issue a dividend or complete a share repurchase. The stock is currently trading
Payday Inc.wants to issue $2 million of debt @ 5% to either issue a dividend or complete a share repurchase. The stock is currently trading at $25 per share and there are 500,000 shares outstanding. The tax rate is 20%.
- What would be the new share price if Payday Inc. used the debt to complete a buyback?
- What would be the new share price if Payday Inc. issued a dividend?
- What would be the new shares outstanding if Payday Inc. repurchased shares?
1 is NOT25 or 25.01
2 is NOT 21 or 21.16
3 is NOT 420000 or 423200
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
