Synchron Corporation borrows long term-capital at an interest rate of 8.5 percent under the expectation that the annual inflation rate over the life of this borrowing was likely to be 5 percent. However, shortly after the loan contract was signed, the actual inflation rate climbed to 5.5 percent and is expected to remain at that level until Synchron's loan reaches maturity. Other factors held constant, what is likely to happen to the market value per share of Synchron's common stock? Please explain your reasoning.

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The Answer of Synchron Corporation borrows long term-capital at an interest rate of 8.5 percent under the expectation that the annual inflation rate over the life of this borrowing was likely to be 5 percent. However, shortly after the loan contract was signed, the actual inflation rate climbed to 5.5 percent and is expected to remain at that level until Synchron's loan reaches maturity. Other factors held constant, what is likely to happen to the market value per share of Synchron's common stock? Please explain your reasoning.

Synchron Corporation Borrows Long Term-Capital at an Interest Rate of 8.5