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Problem 2 You are trying to evaluate the effects of issuing 3000 million of new debt and using the proceeds to either pay a dividend

Problem 2

You are trying to evaluate the effects of issuing 3000 million of new debt and using the proceeds to either pay a dividend or to repurchase shares for Star Inc. Star Inc. currently has 232.44 million shares outstanding and is trading at $56.37 per share. Its current book value of equity is 1276 million and EBIT is 527 million. Tax rate is 40%. Cost of debt for the new is 13%

A. What is star's market value of equity after debt issuance?

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