Suppose that the modigliani-miller assumptions hold and we, Ask an Expert

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Suppose that the Modigliani-Miller assumptions hold, and we have no taxes. Supertrade Inc. is currently a fully equity financed company. It has 10,000 shares with a price of $200 each. The return on its shares is currently 10%. Supertrade decides to buy back 5000 of its shares, and borrows the necessary cash. The debt has a required return on 5%. What is the expected return on Supertrade shares after the change in its capital structure? Show your working

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Financial Management, Finance

Category:- Financial Management
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