Question
X is all-equity with 300,000 shares outstanding. Current market price of one stock is $5.4. X plans to issues 500 new perpetuity bonds, face value
X is all-equity with 300,000 shares outstanding. Current market price of one stock is $5.4. X plans to issues 500 new perpetuity bonds, face value $1000, interest rate 5%. The proceeds from the issuance will be immediately paid out to stockholders. Following the operation (after the payout), the market price of X's stocks adjust to $2.78. What is the value of debt, and the cost of debt for X?
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Advanced Accounting
Authors: Gail Fayerman
1st Canadian Edition
9781118774113, 1118774116, 111803791X, 978-1118037911
