6.7. Rochester Company plans to buy back 1 million shares of its own stock from

6.7. Rochester Company plans to buy back 1 million shares of its own stock from its cash reserves at $50 a share. This will increase the bankruptcy costs by $10 million and the debt/assets ratio from 35% to 40%. The income tax rate of the company is 30%. Find the value of the stock per share after this buyback. Is the company making the right move?Answer: $48.09 no6.8. Altoona Company has debt/assets ratio 50% which is too high and it should be at 45% to be optimal. This debt reduction should also reduce the bankruptcy costs by $30 million. At present Altoona has 5 million shares of common stock selling at $50 each. The tax rate of Altoona is 30%. How many shares of stock should the company sell and buy back bonds from the proceeds to attain its optimal capital structure?