Net effect of these capital restructuring decisions

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There is a debate about stock repurchases whether they are liked by investors or not. Some investors like it because of tax treatments etc. and some other don't because of changes in ownership etc. Many firms issue debt to finance their stock repurchases. Issuing debt is another controversial topic.

Too much debt might harm equity investors but at the same time, it saves the issuing firm's tax dollars. Also, debt is almost always cheaper than equity.

Thus by issuing debt and using that money to buy back shares might lower a firm's cost of capital. Overall, the net effect of these capital restructuring decisions is unknown. Find a firm that issued debt and used those proceeds to repurchase its stock. Summarize the stock market reaction before the repurchase was announced and after the debt was issued and stocks were repurchased. Your summary should not exceed two pages.

Reference no: EM13173111

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