Calculate the value of each share in the company

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Caviar Fishfarm Ltd ('CFL') is unlevered, has an equity beta of 1.25 and unlevered cash flows of $76,800 per annum that will continue in perpetuity. The expected market return is 10%p.a and Treasury bills earn 2%p.a. CFL is currently considering issuing $300,000 in new debt with an 8% interest rate. CFL would repurchase $300,000 of its own shares, using the proceeds of the debt issue. There are currently 32,000 shares outstanding and the company's effective marginal tax rate is 34%.

Assuming it is certain that the company completes the restructure, calculate the value of each share in the company, after the restructure (ignore other information effects). (in dollars to nearest cent)

Reference no: EM132367029

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