"Consider an all-equity financed firm withe 50,000 shares outstanding priced at $10. The cost of equity is 12.0%. The firm has announced that it will issue $300,000 of perpetual bonds and use that amount to buy back shares. Find the new number of shares outstanding if the tax rate is 20%."
"Consider an all-equity financed firm withe 50,000 shares outstanding priced at $10. The cost of equity is 12.0%. The firm has announced that it will issue $300,000 of perpetual bonds and use that amount to buy back shares. Find the new number of shares outstanding if the tax rate is 20%."
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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"Consider an all-equity financed firm withe 50,000 shares outstanding priced at $10. The cost of equity is 12.0%. The firm has announced that it will issue $300,000 of perpetual bonds and use that amount to buy back shares. Find the new number of shares outstanding if the tax rate is 20%."
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