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MJ Enterprises has 50 million shares outstanding with a market price of $25 per share and no debt. ...

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MJ Enterprises has 50 million shares outstanding with a market price of $25 per share and no debt. ...

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.

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Corporate Finance: The Core

Edition: 4^th

Authors: Berk, DeMarzo

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