Question
In: Finance
DA Inc. is currently an all-equity firm, with a value of $500. It has 25 shares...
DA Inc. is currently an all-equity firm, with a value of $500.
It has 25 shares outstanding. The EBIT is 153.85 per year forever.
The tax rate is 35%. The payout is 100%. It is planning to do a
capital restructuring by issuing $200 of perpetual debt, costing
10% and use the proceeds to repurchase stock.
- What is the cost of unlevered equity?
- How many shares will it repurchase? At what price?
- What is the cost of levered equity? Confirm your answer by both
computing the PV of all cash flows to shareholders at levered
equity cost and using MMII.
Solutions
jeff jeffy answered 2 months agoRelated Solutions
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