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John Tye has just been hired as the new corporate finance analyst at I-Ell Enterprises and has received his first assignment. John is to take the $25 million in cash received from a recent divestiture and use part of these proceeds to retire an outstanding $10 million bond issue and the remainder to repurchase common stock. However, the bond issue cannot be retired for another two years. If John can place the funds necessary to retire this $10 million debt into an account earning 6 percent compounded monthly,how much of the $25 million remains to repurchase stock?

John Tye has just been hired as the new corporate finance analyst at I-Ell Enterprises and has received his first assignment. John is to take the $25 million in cash received from a recent divestiture and use part of these proceeds to retire an outstanding $10 million bond issue and the remainder to repurchase common stock. However, the bond issue cannot be retired for another two years. If John can place the funds necessary to retire this $10 million debt into an account earning 6 percent compounded monthly,how much of the $25 million remains to repurchase stock?

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 1nM
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John Tye has just been hired as the new corporate finance analyst at I-Ell Enterprises and has received his first assignment. John is to take the $25 million in cash received from a recent divestiture and use part of these proceeds to retire an outstanding $10 million bond issue and the remainder to repurchase common stock. However, the bond issue cannot be retired for another two years. If John can place the funds necessary to retire this $10 million debt into an account earning 6 percent compounded monthly,how much of the $25 million remains to repurchase stock?

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