How many shares will be repurchased in this transaction

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Doogle has an equity Beta of 1.6, with market expected return of 10% and a risk free rate of 3%. Doogle’s cash flows are expected to be 80 million next year and will grow at 3% per year. Doogle has 3 million shares outstanding. If Doogle wants to add debt and maintain an interest coverage ratio of 10%, where corporate taxes are 40% and the cost of debt capital will be 5%.

A) What is Doogle worth today, when it has no leverage?

B) What will be Doogle’s value if you add leverage and maintain an interest coverage ratio of 10%?

C) How many shares will be repurchased in this transaction?

Reference no: EM131332268

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