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Rally, Inc., is an all-equity firm that has 10 million shares outstanding. The firm's stock is currently traded at $3 per share. Rally plans to
Rally, Inc., is an all-equity firm that has 10 million shares outstanding. The firm's stock is currently traded at $3 per share. Rally plans to announce a leveraged recapitalization plan in which it will borrow $10 million and use these funds to repurchase its shares. The firm's corporate tax rate is 40%, and Rally plans to keep its outstanding debt equal to $10 million permanently. At the announcement of the leveraged recapitalization plan, the share price of Rally isclosestto
A.$2.95
B.$3.40
C.$3.35
D.$3.00
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