What is the maximum number of shares

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Reference no: EM132200356

Question - A firm can invest $252 million to finance an expansion project that will generate $30 million cash flows each year forever with a WACC project = 10%. The firm's existing debt is $70 million, and its current earnings are $23.8 million, and EBITDA is $27 million. P/E and V/EBITDA ratios of similar firms without debt are 14 and 12.2, respectively.

1) If an investment bank helps the firm raise the equity capital and charges minimum issuing costs of $35 million while it is a fair deal for investors, which fraction of ownership can the issuing firm reasonably retain after this issuance of equity?

a) 52.38%

b) 49.47%

c) 47.35%

d) 41.59%

e) 38.51%

f) 34.50%

2) If the issuing price is $15 per share, what is the maximum number of shares the issuing firm can retain in this issuance?

a) 12,212,000

b) 14,212,000

c) 16,275,500

d) 17,025,000

e) 18,160,000

f) 19,025,000

Reference no: EM132200356

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