Question:8-66 Rally, Inc., is an all-equity firm with assets worth $25 billion and 10 billion shares outstanding. Rally plans to borrow $5 billion and use funds to repurchase shares. Rally's corporate tax rate is 25%, and Rally plans to keep its outstanding debt equal to $5 billion permanently. Without the increase in leverage, what would be Rally's share price?
Question:8-66 Rally, Inc., is an all-equity firm with assets worth $25 billion and 10 billion shares outstanding. Rally plans to borrow $5 billion and use funds to repurchase shares. Rally's corporate tax rate is 25%, and Rally plans to keep its outstanding debt equal to $5 billion permanently. Without the increase in leverage, what would be Rally's share price?
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 1P
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What would be Rally`s share price
Transcribed Image Text:Question:8-66
Rally, Inc., is an all-equity firm with assets worth $25 billion and 10
billion shares outstanding. Rally plans to borrow $5 billion and use
funds to repurchase shares. Rally's corporate tax rate is 25%, and
Rally plans to keep its outstanding debt equal to $5 billion
permanently.
Without the increase in leverage, what would be Rally's share price?
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