Problem Solving $(35$ marks$)$:

Consider the following information about Firm ABC:

Assume ABC is currently an all$-$equity financed firm and not subject to taxes. The company also has no

debt, and all its operating income is paid as dividends to the shareholders. The executive team at ABC is

considering whether to borrow $$500,000$ dollars and repurchase $50,000$ shares.

Would you recommend the executives proceed with their plan? You should clearly show AND explain

any calculations you make. Your conclusion should be concise and intuitive, i$.$e$.,$ understandable by a

non$-$subject expert.Problem Solving $(35$ marks$)$:

Consider the following information about Firm ABC:

Assume ABC is currently an all$-$equity financed firm and not subject to taxes. The company also has no

debt, and all its operating income is paid as dividends to the shareholders. The executive team at ABC is

considering whether to borrow $$500,000$ dollars and repurchase $50,000$ shares.

Would you recommend the executives proceed with their plan? You should clearly show AND explain

any calculations you make. Your conclusion should be concise and intuitive, i$.$e$.,$ understandable by a

non$-$subject expert.