Question
Star, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt.
Star, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity capital structure to one that is 30 percent debt. Currently there are 13,000 shares outstanding and the price per share is $43. EBIT is expected to remain at $72,800 per year forever. The interest rate on new debt is 6.5 percent, and there are no taxes.
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