United has 175M shares outstanding trading at $10 per share. The firm has no debt and the cost of equity (re) is 12%. Management is considering a restructuring that involves: issuance of $500M in long term debt at a cost of 6%; and buying back shares for the full proceeds from the debt issuance. The plan would be to keep this new dollar value of debt for the foreseeable future. Assume that at this level of debt the only relevant market imperfection is corporate taxes of 35%. After the restructuring the new value of equity will be: $1,120 $1,250 $1,315 $1,425 United has 175M shares outstanding trading at $10 per share. The firm has no debt and the cost of equity (re) is 12%. Management is considering a restructuring that involves: issuance of $500M in long term debt at a cost of 6%; and buying back shares for the full proceeds from the debt issuance. The plan would be to keep this new dollar value of debt for the foreseeable future. Assume that at this level of debt the only relevant market imperfection is corporate taxes of 35%. After the restructuring the new value of equity will be: $1,120 $1,250 $1,315 $1,425