Suppose the firm in unexpectedly announces that it will issue additional debt, with the same seniority as existing debt and a face value of $50. The firm will use the entire proceeds to repurchase some of the outstanding shares.
a. What is the market price of the new debt?
b. Just after the announcement, what will the price of a share jump to?
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Suppose the firm in unexpectedly announces that it will issue additional debt, with the same seniori...
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