Demonstrate the impact of leverage on share price

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Reference no: EM132004138

Using the information demonstrate the impact of leverage on share price

a. Asset value = firm value = $300 million Unlevered firm shares outstanding is 50 million

b. For unlevered firm how much is the stock price?

c. Create levered firm - Borrow half of firm value to buy back shares.

d. Once shares are repurchased, how much is debt value? Equity value? Shares outstanding? Share price?

Reference no: EM132004138

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