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MJ Enterprises has 50 million shares outstanding with a market price of $25 per share and no debt.  MJ has had consistently stable earnings, and pays a 35% tax rate.  Management plans to borrow $500 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares.  Calculate MJ's share price following announcement of the recapitalization plan.
Textbook 
Corporate Finance: The Core
Edition: 4th
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A year ago
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VU = (50 million shares) × $25 per share = $1250 million
Tax Shield = Debt × τc = $500 million × .35 = $175 million
VL = VU + Interest Tax shield = 1250M + 175M = 1425M/50M shares = 28.50
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