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How many shares of the company a

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Company A is an all equity firm with 60,000 shares of stock outstanding at a market price of %50 a share. EBIT is $87,000. The company has decided to issue $750,000 of debt at 7.5 %. The debt will be used to repurchase shares of the outstanding stock. Currently you own 500 shares of the company. How many shares of the company A will you continue to own if you unlever this position? Assume you can loan out funds at 7.5% interest. Ignore taxes.

  • 300 shares
  • 375 shares
  • 425 shares
  • 500 shares
  • 350 shares

Reference no: EM132548236

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