What is the market value of kurz existing assets

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Question - Kurz Manufacturing is currently an all-equity firm with 18 million shares outstanding and a stock price of $6.50 per share. Although investors currently expect Kurz to remain an all-equity firm, Kurz plans to announce that it will borrow $50 million and use the funds to repurchase shares. Kurz will pay interest only on this debt, and it has no further plans to increase or decrease the amount of debt. Kurz is subject to a 25% corporate tax rate.

Required - What is the market value of Kurz's existing assets before the announcement?

a) None of the answers is correct

b) $200 million

c) $112.5 million

d) $100 million

e) $150 million

Reference no: EM132986410

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