XYZ is an all-equity firm that has 50,000 shares of stock outstanding at a market price of $22.40 per share. The firm is considering a capital structure with 40% debt at a rate of 5% and plans to use the proceeds to repurchase shares. Determine the number of shares outstanding once the debt is issued. a. 37,520 shares b. 38,500 shares c. 30,000 shares d. 39,520 shares
XYZ is an all-equity firm that has 50,000 shares of stock outstanding at a market price of $22.40 per share. The firm is considering a capital structure with 40% debt at a rate of 5% and plans to use the proceeds to repurchase shares. Determine the number of shares outstanding once the debt is issued. a. 37,520 shares b. 38,500 shares c. 30,000 shares d. 39,520 shares
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 12P
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Transcribed Image Text:XYZ is an all-equity firm that has 50,000 shares of stock outstanding at a market price
of $22.40 per share. The firm is considering a capital structure with 40% debt at a rate
of 5% and plans to use the proceeds to repurchase shares. Determine the number of
shares outstanding once the debt is issued.
a. 37,520 shares
b. 38,500 shares
c. 30,000 shares
d. 39,520 shares
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