What is the market value of the ?rm prior to the recap

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Question :

An all-equity business has 105 million shares outstanding Selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization {a recap]. It will raise $1 billion in debt and repurchase 50 million shares;

a. What is the market value of the ?rm prior to the recap?

What is the market value of equity? [Enter your answers in billions rounded to 1 decimal plaoe.} Market value of equity

b. Assuming the Irrelevance Proposition holds. what is the market value of the ?rm alter the recap? What is the market value of equity?

{Enter your answers in billions rounded to 1 decimal place] Market value ofequily

c. Assume now that the recap increasos total ?rm cash flows+ which adds $110 million to the value of the iirm. Now what is the market value of the firm? What is the market value of equity? [Enter your answers in billions rounded to 2 decimal places}

Reference no: EM132344601

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