## Question

# Two investors have purchased shares of an all-equity firm which has 70,000 shares outstanding at 15 GBP each. A owns shares of a total value

Two investors have purchased shares of an all-equity firm which has 70,000 shares outstanding at 15 GBP each. A owns shares of a total value of 50,000 GBP and has borrowed 15,000 GBP. B owns shares of a total value of 90,000 GBP and has lent 20,000 GBP. The firm decides to repurchase 25% of its shares by raising perpetual debt at the risk-free rate of 6%.

(i) Assume that the first Modigliani - Miller proposition holds and the investor positions are optimal. **Find the new positions of the investors.**

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### Precalculus

**Authors:** Michael Sullivan

9th edition

321716835, 321716833, 978-0321716835

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