Question: ACB Inc. is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a
ACB Inc. is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.3. The T-bill rate is 8% and the T-Bond rate is 9.5%. Your research indicates that the debt rating will be as follows at different debt levels: The firm currently has 2 million shares outstanding at S30 per share, and the tax rate is 40%. What is the firm's optimal debt ratio? Assuming that the firm restructures and purchases stock with debt, what will the value ot the stock be after the restructuring? ACB Inc. is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.3. The T-bill rate is 8% and the T-Bond rate is 9.5%. Your research indicates that the debt rating will be as follows at different debt levels: The firm currently has 2 million shares outstanding at S30 per share, and the tax rate is 40%. What is the firm's optimal debt ratio? Assuming that the firm restructures and purchases stock with debt, what will the value ot the stock be after the restructuring
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