Rally, Inc., is anall-equity firm with assets worth $51 billion and 5 billion shares outstanding. Rally plans to borrow $17 billion and use funds to repurchase shares.Rally's corporate tax rate is 21%, and Rally plans to keep its outstanding debt equal to $17 billion permanently.

a. Without the increase inleverage, what would beRally's shareprice?

b. Suppose Rally offers $10.80 per share to repurchase its shares. Would shareholders sell for thisprice?

c. Suppose Rally offers $11.02 pershare, and shareholders tender their shares at this price. What will beRally's share price after therepurchase?

d. What is the lowest price Rally can offer and have shareholders tender theirshares? What will be its stock price after the share repurchase in thatcase?