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Unexpectedly the company announces today (time 0) a recapitalization: they will immediately increase their debt...

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Finance

Unexpectedly the company announces today (time 0) a recapitalization: they will immediately increase their debt by an additional 94,000,000 and buy back an equal amount of equity. The debt will then be kept constant perpetually. Before the debt issuance there are 20,000,000 shares outstanding. b) What is the share price after the announcement but before the recapitalization transaction is executed? Solution is: b) 14.26

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