Given a P/E of 10x, (1) what cost of debt is the minimum a company could use to accretively repurchase shares? (2) What about before tax cost of debt?
Would this be the correct way to think of it:
(1) seller's yield = inverse of P/E multiple = 1/10 = 10%; so would need cost of debt to be less than 10%
(2) would need cost of debt to be 10%(1-tax rate).
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