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Unformatted text preview: MRP is 5%. The beta for the shoe company is 1.75. The White Queen arranged for the hatter to meet the Tweedle Bros. Investments Co. The Tweedle brothers have suggested that the hatter use debt to buy-back the firms stock. Tweedle has determined that Shoe can issue $10M in risk-free debt if the proceeds are used to retire equity. And that is exactly what he will do. Assume a tax rate of 0% (or 33% for another version). What is the stock price after the recapitalization is complete? What is the new equity beta? How many shares are outstanding?...
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This note was uploaded on 01/24/2012 for the course FIN 3403 taught by Professor Tapley during the Spring '06 term at University of Florida.
- Spring '06