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Problem:

A company has been 100% equity owned but recently made changes to its capital structure. Here is the data:

Issues $8,000,000 in new debt to buy back stock
The firm had no short term investments before or after the recapitalization
The firm had 1,000,000 in shares outstanding before the recapitalizaion
The capital structure now has 20% debt
The company operations are valued at $40 million after recapitalization

1. Stock price before the repurchase?

2. Number of shares repurchased?

3. Value of equity post repurchase?

Note: Explain all calculation and formulas.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147954

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