Compute the value of judylee unlevered equity

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JudyLee Industries has 30 million shares outstanding with a market price of $20 per share and no debt. JudyLee has had consistently stable earnings, and pays a 35% tax rate. Management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares.

1) Compute the value of JudyLee's unlevered equity.

2) Compute the present value of JudyLee's interest tax shield.

3) After the recapitalization, compute the total value of JudyLee as a levered firm.

4) After the recapitalization, compute the value of JudyLee's levered equity.

5) After the recapitalization, compute the value of a share of JudyLee's stock.

Reference no: EM132557290

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