Answer:
New issued debt will be "$55.44 million". The further explanation is given below.
Explanation:
As debt interest reduces equity grows:
Present equity's value will be:
= [tex]15.60\times 10[/tex]
= $[tex]156[/tex]
Debt's current value will be:
= [tex]156+40.56[/tex]
= [tex]196.56[/tex]
Now,
New share price = [tex]196.56[/tex] = [tex]12.6[/tex]
Value of new issued debt will be:
= $[tex]55.44 \ million[/tex]
Purchased shares will be:
= [tex]\frac{New \ debt \ to \ be \ issued}{Price \ per \ share}[/tex]
= [tex]\frac{55.44}{12.6}[/tex]
= $[tex]4.4 \ millions[/tex]
