Gradient Inc. is unlevered, is valued at $2M and has 50,000 shares outstanding. The compa that in the near future it will issue $1.5M of debt and buy back $500,000 of stock. Consid be in perpetuity and have an interest rate of 4%. If the firm is in the 25% tax bracket, how of stock will be purchased?
Gradient Inc. is unlevered, is valued at $2M and has 50,000 shares outstanding. The compa that in the near future it will issue $1.5M of debt and buy back $500,000 of stock. Consid be in perpetuity and have an interest rate of 4%. If the firm is in the 25% tax bracket, how of stock will be purchased?
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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Qd 192.
Transcribed Image Text:13. Gradient Inc. is unlevered, is valued at $2M and has 50,000 shares outstanding. The company announces
that in the near future it will issue $1.5M of debt and buy back $500,000 of stock. Consider the debt to
be in perpetuity and have an interest rate of 4%. If the firm is in the 25% tax bracket, how many shares
of stock will be purchased?
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