How many shares will be repurchased

Reference no: EM131477256

Question: Debby, the owner of Oxford Corporation, has decided that it's time to make some changes to the firm's capital structure. She estimates that Oxford's FCF is $150,000 each year and that this FCF can be expected to recur annually forever. The company has not debt and has 30,000 shares outstanding, each of which is currently worth $50. Debby wants Oxford to borrow $600,000 of perpetual debt and to use the proceeds to repurchase shares. Assuming the interest rate on debt is rD = 6% and the corporate tax rate is TC = 30%, calculate the following changes:

a. What is Oxford's market value before it issued debt?

b. What is Oxford's market value after it issued debt?

c. What will be Oxford share price after the debt issuance?

d. How many shares will be repurchased?

e. What is Oxford's equity value after the repurchase of the shares?

f. What is Oxford's cost of equity after the repurchase and dividend payment?

g. What is Oxford WACC after the repurchase and dividend payment?

Reference no: EM131477256

Questions Cloud

Typical biography of a person character : A biographical sketch is shorter and more specific than a typical biography of a person's character, life, and achievements.

Explain three major trends affecting health care : Go beyond the immediate data and speculate on the major forces that will affect the delivery of health care in the future.

Describe the algorithm based web search and its advantages : Describe the algorithm based web search, its advantages and disadvantages.

What would be the three most important points to include : Many of today's Americans are malnourished also, but they are inundated with unhealthy foods and require a multidisciplinary approach to nutrition education.

How many shares will be repurchased : Debby, the owner of Oxford Corporation, has decided that it's time to make some changes to the firm's capital structure. She estimates that Oxford's FCF is $150

Battle of lexington and concord : Discuss how all of the following helped cause the American Revolution:

Describe an ecommerce network and its application : Describe an ecommerce network and its application. Does a properly installed and maintained firewall provide adequate defense against intrusion?

The benefits of alternative medicine : Write an essay on the benefits of alternative medicine compared to pharmaceutical drugs.

Roots of the american revolution : Describe the ways in which all of the following events or issues served as the roots of the American Revolution:

User Account

All Pages