Charleston Mills is an all-equity firm with a total market value of $221,000. The firm has 8,000 shares of stock outstanding. Management is considering issuing $50,000 of debt at an interest rate of 7 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares can the firm repurchase if it issues the debt securities?

Financial Management: Theory & Practice
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ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter15: Capital Structure Decisions
Section: Chapter Questions
Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...
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Charleston Mills is an all-equity firm with a total
market value of $221,000. The firm has 8,000
shares of stock outstanding. Management is
considering issuing $50,000 of debt at an
interest rate of 7 percent and using the
proceeds on a stock repurchase. Ignore taxes.
How many shares can the firm repurchase if it
issues the debt securities?
Transcribed Image Text:Charleston Mills is an all-equity firm with a total market value of $221,000. The firm has 8,000 shares of stock outstanding. Management is considering issuing $50,000 of debt at an interest rate of 7 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares can the firm repurchase if it issues the debt securities?
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