CPK is an all equity firm. It currently has 200 locations and plans to open...
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CPK is an all equity firm. It currently has 200 locations and plans to open 20 new locations in 2007. its internal growth rate is 5%. CPK has maintained borrowing capacity available under an existing $10 million line of credit. The management is considering a 10% or 20% share repurchase in 2007. The fund needed for share repurchase will come from new debt issuance. Its current book capital is $50 million. The stock price recently dropped by 15%. Given the above information, would (a) 10% or (b) 20% share repurchase in 2007 likely benefit shareholders most? Briefly explain why.
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