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The CFO of Recap has decided to change the capital structure. She is planning to finance 25% of their capital structure with debt. Assume that
The CFO of Recap has decided to change the capital structure. She is planning to finance 25% of their capital structure with debt. Assume that the debt can be issued at the risk-free rate. The company would issue debt and use all the proceeds to repurchase some of their shares after levering. Assume that the tax rate is still zero.\ \ c) What is the dollar amount of debt the company must issue?\ \ d) What is the expected return on equity now? (See equations below)\ \ e) How many shares can it repurchase?
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