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Roys Toys, Inc. is currently an all-equity firm with 500,000 shares of outstanding equity and a stock price of $10 per share. The firm is
Roys Toys, Inc. is currently an all-equity firm with 500,000 shares of outstanding equity and a stock price of $10 per share. The firm is contemplating a restructuring that would involve issuing $1 million in debt and using all the proceeds to repurchase outstanding equity. The debt would have an interest rate of 8% and equity would be repurchased at a price of $10 per share. Assume that markets are perfect (no taxes, no bankruptcy, etc.). How many shares will be repurchased if the firm conducts the restructuring
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