Question
You have the following data for ABM Corp. The market value of equity is $300M, and the market value of debt is 90M. The company
You have the following data for ABM Corp. The market value of equity is $300M, and the market value of debt is 90M. The company is considering repurchasing its bonds for $20M and issuing common stock for the same amount. This would move beta to 1.29 and after-tax cost of debt to 7%. Estimate new WACC if risk-free rate is 4.7% and the return on stock market is 9.2%. The company pays 22% taxes on its profits.
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
