Question
Suppose, the firm has moved from zero debt to having debt as mentioned in (Suppose, ABC corp. comes up with a new idea to buy
Suppose, the firm has moved from zero debt to having debt as mentioned in (Suppose, ABC corp. comes up with a new idea to buy back shares from the market to replace equity. The idea is to add Rs 350,000 worth of debt. How many shares will be bought back?. You still own 100 shares after the restructure. Though the firm has debt now, your preference is still the old unlevered earnings. Show using home made leverage how you can continue to earn the same earnings that you had before the restructure, even though you currently own shares of the levered firm
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