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Execute a leveraged recapitalization

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An all-equiry business has 175M shares outstanding selling for $20/share. Management believes interest rates are unreasonably low and decides to execute a leveraged recapitalization. It will raise $1B in debt and repurchase 50M shares.

If the recap increases total firm cash flows, and adds $250M to the value of the company, what is the market value and the market value of equity?

Reference no: EM132131592

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