You are working for an all equity firm. Your firm's current cost of equity is 8.7 percent and the tax rate is 25 per The firm has 450,000 shares of stock outstanding with a market price of $73.20 a share. The firm is considering restructuring that allows $7.8 million of debt with a coupon rate of 4.5 percent. The debt will be sold at par val the proceeds will be used to repurchase shares. What is the value per share after the recapitalization? (Hint: Yo to determine the total value of equity after recapitalization that accounts for the PV of interest tax shield and th number of shares outstanding after repurchase) $77.71 ⚫ $78.88 $80.05 $81.22 $82.39
You are working for an all equity firm. Your firm's current cost of equity is 8.7 percent and the tax rate is 25 per The firm has 450,000 shares of stock outstanding with a market price of $73.20 a share. The firm is considering restructuring that allows $7.8 million of debt with a coupon rate of 4.5 percent. The debt will be sold at par val the proceeds will be used to repurchase shares. What is the value per share after the recapitalization? (Hint: Yo to determine the total value of equity after recapitalization that accounts for the PV of interest tax shield and th number of shares outstanding after repurchase) $77.71 ⚫ $78.88 $80.05 $81.22 $82.39
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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Transcribed Image Text:QUESTION 7
You are working for an all equity firm. Your firm's current cost of equity is 8.7 percent and the tax rate is 25 percent.
The firm has 450,000 shares of stock outstanding with a market price of $73.20 a share. The firm is considering capital
restructuring that allows $7.8 million of debt with a coupon rate of 4.5 percent. The debt will be sold at par value and
the proceeds will be used to repurchase shares. What is the value per share after the recapitalization? (Hint: You need
to determine the total value of equity after recapitalization that accounts for the PV of interest tax shield and the
number of shares outstanding after repurchase)
$77.71
$78.88
$80.05
$81.22
$82.39
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