You operate an all-equity financed company in perfect markets and generate a net operating profit of $450,000.
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You operate an all-equity financed company in perfect markets and generate a net operating profit of $450,000. Your firm has just sold $1.8 million worth of 4% coupon rate bonds and plans to use the proceeds to buy back outstanding shares of stock. Your firm’s industry requires a 10.75% ROA.
a. Calculate the market price and required return for your firm’s stock just prior to the repurchase.
b. Calculate the market price and required return for your firm’s stock just after the repurchase?
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Related Book For 
Principles Of Managerial Finance
ISBN: 9781292400648
16th Global Edition
Authors: Chad Zutter, Scott Smart
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