PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
Question
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Chapter 16, Problem 15PS

a)

Summary Introduction

To determine: The stock price of company H after the planned dividend pay-out.

b)

Summary Introduction

To determine: The impact on stock price due to repurchase announcement and the number of shares company need to repurchase.

The share repurchase is the strategy by which companies will take back or buy back its own shares from the market place. If the management considered the shares are undervalued the company may buy back its shares.

c)

Summary Introduction

To discuss: The impact of with- and ex-dividend share prices and the number of shares to be repurchased.

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If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.
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