Currently Pi Gold LTD, has no debt, and it has market value of $40 million, and cost of equity of 11%. The CEO of Pi Gold LTD, Professor Green, is considering a capital restructuring to repurchase some shares by issuing 50,000 zero-coupon bonds that will mature in 5 years. Similar bonds in the market are selling for 60% of face value. The face value per bond is stated at $1,000. Tax rate is 30%. Compute the following after the restructuring.

Answer rating: 100% (QA)

Given Market value E 40 million Cost of equity Ke 11 Tax rate T 30 Face value F 1000 per bond Discou... View the full answer