Rally inc is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and rally plans to keep its outstanding debt equal to 10B permanently. After the increase in leverage, but before the share repurchase, what is Rally’s share price?
Rally inc is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and rally plans to keep its outstanding debt equal to 10B permanently. After the increase in leverage, but before the share repurchase, what is Rally’s share price?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 9MC
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Rally inc is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and rally plans to keep its outstanding debt equal to 10B permanently. After the increase in leverage, but before the share repurchase, what is Rally’s share price?
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