Right to repurchase a debt issue

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• Share repurchase

  How many new shares must Baruk issue to raise the capital needed to pay its debt obligation? c. After repaying the debt, what will Baruk's share price be? 2.

• Finance Terms - Fill in the Blanks

  When a financial security such as a bond has a call provision attached to it, it means that the issuer has the right to call the security i.e. repurchase the security. f.

• Market value of assets, share price, repurchase amount, cost of capital

  Suppose that WM is an all equity firm before the debt issue, it is subject to 36% corporate tax rate, its cost of debt is 5% and equity cost of capital is 10%. a.

• Calculating share price and weighted cost of capital

  BEA management plans to raise $60 million to by issuing debt to repurchase shares. Suppose that BEA is an all equity firm before the debt issue, it is subject to 36% corporate tax rate, its cost of debt is 5% and equity cost of capital is 10%.

• Repurchase Stock

  ., plans to announce that it will issue $2 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will have a 6-percent annual coupon rate.

• Estimated stock price after the capital structure change

  The $1,200 million raised from the debt issue would be use to repurchase stock at $32 per share. The repurchase will have no effect on the firm's EBIT; however, after the repurchase, the cost of equity will increase to 11%.

• Optimal capital structure, yield to maturity, bonds, market

  A call provision in a bond agreement grants the issuer the right to: repurchase the bonds prior to maturity at a pre-specified price. replace the bonds with equity securities.

• Stock price after repurchase

  The $1,200 million raised from the debt issue would be used to repurchase stock at $32 per share. The repurchase will have no effect on the firm's EBIT; however, after the repurchase, the cost of equity will increase to 11 percent.

• Expected stock price after recapitalization

  The company's investment bankers have suggested that the company do a recapitalization. Their suggestion is to issue enough new bonds at a yield of 10 percent to repurchase 1 million shares of common stock.