New value of the equity, Corporate Finance

GeKay is now considering issuing $3 million in debt, and paying $150,000 yearly in interest at 5%, that it would keep rolling over "forever" (in perpetuity).

The proceeds would be used torepurchase stock.  If GeKay were to go by and implement the debt issue & repurchase:

a. What would be the new value of the firm?

b. What would be the new value of the equity?

 

Posted Date: 3/30/2013 2:59:46 AM | Location : United States







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