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Value of a share after the capital structure change

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Reference no: EM132757994

Kappa is an all-equity firm. It has 120,000 shares outstanding, currently worth £20 per share. The unlevered cost of equity is 20%. The firm has decided to issue £1,000,000 of 8% debt, and to use the proceeds to repurchase shares. Assume a 28% corporate tax rate.

What is the value of a share after the capital structure change?

Reference no: EM132757994

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