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Author Question: Reynolds Resorts is currently 100% equity financed. The CFO is considering a recapitalization plan ... (Read 319 times)

kaitlynndavis

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on: Aug 7, 2023
Reynolds Resorts is currently 100% equity financed. The CFO is considering a recapitalization plan under which the firm would issue long-term debt with a yield of 8% and use the proceeds to repurchase common stock. The recapitalization would not change the company’s total assets, nor would it affect the firm’s basic earning power, which is currently 18%. The CFO believes that this recapitalization would reduce the WACC and increase the stock price. What would also be likely to occur if the company goes ahead with the recapitalization plan?

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The company’s cost of equity would increase.


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The company’s earnings per share would decline.


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The company’s net income would increase.


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The company’s ROE would decline.

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by kaitlynndavis on Aug 7, 2023

Karla347

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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kaitlynndavis

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Reply 2 on: Aug 7, 2023
Gracias!

diana chang

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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