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F is all-equity with 300,000 shares outstanding. The current market price of one stock is $5.4. F…

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F is all-equity with 300,000 shares outstanding. The current market price of one stock is $5.4. F plans to issue 500 new perpetuity bonds, face value $1000, interest rate 5%. The proceeds from the issuance will be immediately paid out to stockholders. Following the operation (after the payout), the market price of F’s stocks adjust to $2.78. What is the value of debt, and the cost of debt for F?

Question 3 options:

$786,000 / 3,2%

$1,230,000 / 4%

$834,000 / 2,7%

$900,000 / 5%

F is all-equity with 300,000 shares outstanding. Current market price of one stock is $5.4. F plans to issues 500 new perpetuity bonds, face value $1000, interest rate 5%. The proceeds from the issuance will be immediately paid out to stockholders. Following the operation (after the payout), the market price of F’s stocks adjust to $2.78. What is the value of debt, and the cost of debt for F?

Question options:

a. $786,000 / 3,2%

b. $1,230,000 / 4%

c. $834,000 / 2,7%

d. $900,000 / 5%

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