Capitalization of the company after the transaction takes

Reference no: EM133264502

Question: Bonanza Billiard Games is an all-equity firm with 50 million shares outstanding, which are currently trading at $22 per share. Last month, Bonanza announced that it will change its capital structure by issuing $300 million in debt. The $200 million raised by this issue, plus another $200 million in cash that Bonanza already has, will be used to repurchase existing shares of stock. Assume that capital markets are perfect.

- What is the market capitalization of the company before the transaction takes place?
- What is the market capitalization of the company after the transaction takes place?

Reference no: EM133264502

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