How does this affect the firms share price

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Reference no: EM133910098

Problem

Your firm is considering an increase in its leverage ratio, implemented by issuing new debt, paying off the existing debt, and repurchasing equity using the remaining funds. Some information: Year 1 2 3 4 Unlevered free cash flow $80,761,000 $80,752,116 $80,731,928 $80,920,841 Long-term growth rate 1.100% Income tax rate 24.5% Current Capital Structure Information Market value of long-term debt $114,995,734 Number of shares outstanding 9,227,000 Most recent share price $44.46 Return on debt 5.200% Return on equity 19.533% Target Capital Structure Information Leverage ratio 46.8974% Return on debt 6.000%. Get the instant assignment help.

Question I: How does this affect the firm's cost of capital (WACC)?
Question II: How does this affect the firm's value?
Question III: How does this affect the firm's share price?

Reference no: EM133910098

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