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Is a stock buyback feasible

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As the acting CFO of Oracle Corporation, you have been tasked with increasing the company's valuation. Several options are under consideration and need your assessment.

Question 1: The company may issue preferred stock to raise $500 million to fund new wireless networking products. The products are estimated to provide a 13% IRR. What is WACC currently? How much would it be if the preferred stock is issued? Is this a feasible alternative?

Facts: Current debt costs 4.0% (net of tax), current equity costs 12.25%, and the preferred stock would cost 10.00%. Debt currently is $300 million and equity is $900 million.

Question 2: The company could choose to execute a stock buyback. Based on the ValueLine report provided, is Oracle's stock overpriced, underpriced, or is it fairly priced? Is a stock buyback feasible?

Reference no: EM132498930

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