Question
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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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds
11th Edition
1305262999, 1305262997, 035726164X, 978-1305262997
