How many shares can it repurchase

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One company produces one kind of product.In one year, if the economic situation is good, the price of one piece will be $20. if the economic situation is bad, the price of one piece wil be $10.the company needs no more investment to produce 3.75million pieces.And if it invests additional $150million, it can produce 15 million additional pieces.One dealer offers a one-year forward price of $15 per piece to buy all the products in one year.Assume that the risk free interest rate is 5% and the income tax rate is 20%.Calculate the company's value after tax.

The company has no debt now and has 1 million outstanding shares.Now it wants to issue $40 million riskless debts to repurchase shares with the value of $40 million.How many shares can it repurchase?

 

Reference no: EM13303599

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