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Author Question: Reefer Trucking Inc. is expected to generate EBIT of $8 million annually in perpetuity (starting in ... (Read 51 times)

asan beg

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on: Apr 25, 2021
Reefer Trucking Inc. is expected to generate EBIT of $8 million annually in perpetuity (starting in one year). Reefer is all equity financed and shareholders require a return of 9%. The corporate tax rate is 35%. There are 3 million shares outstanding. Reefer is proposing to borrow $10 million of perpetual debt which it will never increase or repay. The company intends to use the borrowed funds to repurchase shares at a price of $19.26. You are a shareholder in Reefer. When it announces the share buyback, will you offer to sell the company any (all) of your shares?
◦ Yes, I will sell all of my shares. $19.26 is the fair stock price.
◦ Yes, I will sell the same proportion of shares (@16.3%) that the company buys.
◦ No. A repurchase at the pre-announcement price does not affect shareholder wealth.
◦ No. I should wait, because the increase in leverage will raise the stock price above $19.26.
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by asan beg on Apr 25, 2021

mirabriestensky

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Reply #1 on: Apr 25, 2021
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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asan beg

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Reply 2 on: Apr 25, 2021
Excellent

scikid

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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