Determine what will be value of bbc after issuing the debt

Assignment Help Finance Basics

Reference no: EM1344102

Assume that there are no taxes or transaction costs, and that the Modigliani-Miller propositions are true. Bluth Banana Corp (BBC). currently has 35 million shares outstanding (with a stock price of $18 per share) and no debt. The beta of the firm is 1.2.

BBC plans to issue $50 million (market value) in risk-free debt. It plans to use this $50 million to repurchase stock. The market risk premium is 4% and the risk free rate is 5%.

a.) Evaluate what is the value of the equity in BBC?

b.) Evaluate what is BBC's WACC before issuing the debt?

c.) Determine what will be value of BBC after issuing the debt?

d.) Find what will BBC's WACC be after issuing the debt?

e.) After this transaction, what will the beta of BBC's equity be?

Reference no: EM1344102

Questions Cloud

Evaluate the value of the objective function over : Evaluate the value of the objective function over the five-year period for each of the three policies and which policy is best? Why?

Consolidation criterion led : When is consolidation considered inappropriate even though the parent holds a majority of the voting common shares of another firm?

Who in the us government is responsible for computing : Who in the U.S. government is responsible for computing also reporting the consumer price index.

Comparable transaction analysis : Company A shares are currently trading at $50 per share. A survey of Wall Street analysts disclose that EPS expectations for firm A for the full year 2003 are $2.50 per share.

Determine what will be value of bbc after issuing the debt : Evaluate what is the value of the equity in BBC and evaluate what is BBC's WACC before issuing the debt also determine what will be value of BBC after issuing the debt

Explaining formal risk assessment of desktop systems : As apart of a formal risk assessment of desktop systems in small accounting firm with limited IT Support, you have identified asset "integrity of customer and financial data files on desktop systems" and threat.

Illustrate what is the gini coefficient for this society : One has yearly income $10000, the other has yearly income $90000. Illustrate what is the Gini coefficient for this society.

How might you construct a measure of the change : How might you construct a measure of the change in the price level. Illustrate what additional information might you need to construct your measure.

Changes without any corresponding economic changes : Explain what features of accounting, if any, would make it costly for dishonest managers to make the same changes without any corresponding economic changes

User Account

All Pages