What is the effect of a share repurchase on the firms size

Reference no: EM131241613

1. A $500 million firm is financed by $250 million in debt and $250 million in equity. If the market value does not change, describe some actions that managers can undertake to increase firm size to $600 million and change its debt/equity ratio to 5:1.

2. What is the effect of a share repurchase on the firm's size and the firm's debt ratio in a perfect market?

3. What is the financing pecking order?

4. Evaluate: If a theory predicts that issuing equity is more expensive than issuing debt, a pecking order
should naturally arise.

5. What is the financing pyramid? Is it a good description of empirical reality?

6. Does the pecking order necessarily imply that firms are financed like a financing pyramid?

Reference no: EM131241613

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