Top Posters
Since Sunday
25
13
11
9
5
l
4
4
R
4
M
4
k
4
w
3
M
3
New Topic  
EpiscoWhat EpiscoWhat
wrote...
Posts: 268
Rep: 3 0
4 years ago
Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs.  Suppose that at the start of the year, MI has no debt outstanding, but has 5.6 million shares of stock outstanding.  If MI issues debt of $125 million due next year and uses the proceeds to repurchase shares, the share price following the announcement of the repurchase will be closest to:
A) $23.90
B) $23.75
C) $25.00
D) $5.15
Textbook 

Corporate Finance: The Core


Edition: 4th
Authors:
Read 60 times
2 Replies
Replies
Answer verified by a subject expert
EgorGruzdevEgorGruzdev
wrote...
Posts: 422
4 years ago
Sign in or Sign up in seconds to unlock everything for free
More questions for this book are available here
A
Explanation:  A) VL =   = $28.89 million

Vdebt =   = $104.76 million

Total Value = VL + Vdebt = $28.89 + $104.76 = $133.65 million

Price per Share = $133.65M/5.6 million shares = $23.87
1

Related Topics

wrote...
A month ago
Thanks
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  461 People Browsing
 644 Signed Up Today
Your Opinion
Which 'study break' activity do you find most distracting?
Votes: 275

Related Images
 153