ABC Co. has an expected EBIT (eamings before interest and taxes) of $63,000 in perpetuity and...
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ABC Co. has an expected EBIT (eamings before interest and taxes) of $63,000 in perpetuity and a tax rate of 21 percent. Its unlevered cost of capital is 12 percent. The stocks outstanding are 100,000 shares. The firm issues $115,000 perpetual debt at 7% to exchange for equity. Please calculate the followings: 1. What is the value of the company's stock after issuing debt (SL)? 2. What is the stock price before the announcement of debt issuance? 3. What is the stock price after the announcement of debt issuance? 4. How many shares of stock need to be exchanged? 5. What is the stock price after the debt issuance? ABC Co. has an expected EBIT (eamings before interest and taxes) of $63,000 in perpetuity and a tax rate of 21 percent. Its unlevered cost of capital is 12 percent. The stocks outstanding are 100,000 shares. The firm issues $115,000 perpetual debt at 7% to exchange for equity. Please calculate the followings: 1. What is the value of the company's stock after issuing debt (SL)? 2. What is the stock price before the announcement of debt issuance? 3. What is the stock price after the announcement of debt issuance? 4. How many shares of stock need to be exchanged? 5. What is the stock price after the debt issuance?
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Answer rating: 100% (QA)
ABC Co Stock Valuation and Debt Issuance 1 Value of the companys stock after issuing debt SL First calculate the value of the company before issuing d... View the full answer
Related Book For
Corporate Finance
ISBN: 9781265533199
13th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
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