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COMPANY IS EXPECTED TO GENERATE EBIT OF $7 MILLION ANNUALLY STARTING IN ONE YEAR. COMPANY IS ALL-EQUITY FINANCED WITH 2 MILLION SHARES OUTSTANDING...
COMPANY IS EXPECTED TO GENERATE EBIT OF $7 MILLION ANNUALLY STARTING IN ONE YEAR. COMPANY IS ALL-EQUITY FINANCED WITH 2 MILLION SHARES OUTSTANDING AND SHAREHOLDERS REQUIRE RETURN OF 9%. TAX RATE IS 35%. COMPANY THINKING OF ISSUING $5 MILLION OF CONTINOUS BONDS WITH AN ANNUAL COUPON RATE OF 6%. THE COMPANY USES THE $5MILLION OF DEBT TO REPURCHASE STOCK. ASSUME THAT THE COMPANY NEVER INCREASES OR DECREASES DEBTS AFTER BORROWING. WHAT PRICE SHOULD COMPANY OFFER TO REPURCHASE SHARES SO THAT THE REPURCHASE PRICE IS A 5% PREMIUM OVER THE POST-REPURCHASE PRICE?
