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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}
If the required rate of return on this stock is 9 percent and the current market price is $45.64, what is the long-term rate of dividend growth expected by the market?
Marsha wants to have $1 million in her 401(K) in 30 years. She wants to invest $5,000 a year into the 401(K). About how much more than $5,000 a year will she need to invest each year to meet her goal of $1 million if all investments can earn 8%?
you realize your company would make a significant profit from doing business in China. You also discover that policies on employee welfare, labor relations, etc. are the antithesis of what your CEO firmly believes.
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A company’s weighted average cost of capital is 10% per year and the market value of its debt is $54.2 million. what is the value per share?
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Assume that the average firm in your company's industry is expected to grow at constant rate of 5%. What is the estimated value per share of your firm’s stock?
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