Blackstone, Inc. is currently an all-equity firm that has 65,000 shares of stock outstanding at a market price of $22 a share. The firm has decided to leverage its operations by issuing $605,000 of debt at an interest rate of 6.5%. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. The company currently pays no taxes. What is the minimum level of earnings before interest and taxes that Blackstone is expecting?
Blackstone, Inc. is currently an all-equity firm that has 65,000 shares of stock outstanding at a market price of $22 a share. The firm has decided to leverage its operations by issuing $605,000 of debt at an interest rate of 6.5%. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. The company currently pays no taxes. What is the minimum level of earnings before interest and taxes that Blackstone is expecting?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Blackstone, Inc. is currently an all-equity firm that has 65,000 shares of stock outstanding at a market price of $22 a share. The firm has decided to leverage its operations by issuing $605,000 of debt at an interest rate of 6.5%. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. The company currently pays no taxes. What is the minimum level of earnings before interest and taxes that Blackstone is expecting?
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