What stock price should it offer in the repurchase

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Question: Bonus: Reefer Trucking Inc. is an all equity firm. The cost of equity (Ku) is 16%, and its tax rate is 35%. Reefer has 1.50 million shares outstanding that trade for $11.00 each. Reefer is considering a recapitalization where it will issue $5.25 million of perpetual bonds with an annual coupon of 9%, and use the proceeds to repurchase shares. What stock price should it offer in the repurchase so that the offered price equals the price that will prevail after the recapitalization?

Reference no: EM133331585

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