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Myoptic Optical is a levered no-growth firm with $1, 400, 000 debt outstanding. Firm value is $2, 277, 500. The firm's owner is currently contemplating whether to reduce its debt ratio to a more reasonable 40%. The firm will do so by issuing stock and retiring an equal amount of debt. The unlevered cost of equity is 16% and the cost of debt is 6%. The firm currently has 35, 100 shares outstanding and the firm's tax rate is 35%.
(e) How many shares of stock must Myoptic Optical issue?
(f) What will be Myoptic Optical's new cost of levered (with debt) equity after the recapitalization?
(g) What will Myoptic Optical's new WACC be?
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Suppose that 1 Euro could be purchased in the foreign exchange market today for $.025. If the Euro appreciated 10% tomorrow against the dollar, how many Euros would a dollar buy tomorrow?
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The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $6.2 million, and the 2015 balance sheet showed long-term debt of $6.4 million. The 2015 income statement showed an interest expense of $215,000. What was the firm’s 20..
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