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An all-equity business has 100 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a dividend recapitalization (a recap). It will raise $1 billion in debt and repurchase 50 million shares. a. What is the market value of the firm prior to the recap? What is the market value of equity? b. Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity? c. Do equity shareholders appear to have gained or lost as a result of the recap? Please explain. d. Assume now that the recap increases total firm cash flows, which adds $100 million to the value of the firm. Now what is the market value of the firm? What is the market value of the equity? e. Do equity shareholders appear to have gained or lost as a result of the recap in this revised scenario?
Bankruptcy plays no role in settling labor disputes and product liability suits. Such issues are outside the bounds of bankruptcy law.
Estimate the average length of the firm's short-term operating cycle. How often would the cycle turn over in a year?
in this assignment you will undertake calculations in order to evaluate a project and decide if it should be accepted
Market value ratios try to answer what question for potential investors? Do financial statements contain all of the necessary information to answer this question? Explain in terms of the P/E (price earnings) ratio.
a few months have now passed and air jet best parts inc. is considering the purchase on a new machine that will
Your great aunt left you $20 000 when she died. You can invest the money to earn 12% per year. If you spend $3540 per year out of this inheritance, how long will the money last
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The "Inflation-Plus" CD is the safer investment because it guarantees the purchasing power of the investment.
Calculate how much it would be economically feasible to spend on the overhaul of equipment which has to be replaced every twenty years at a fixed cost of $75,000.
You have just negotiated a six-year, 6.84%, $45,000 new car loan with the manager of a local auto dealer. While he goes back to the loan arranger to bring you the payment details, you decide to figure them out for yourself.
Jones surgicenter uses 90,000 bags of IV solution annually. The optimal safety stock (which is on hand initially) is 1,000 bags. Each bags costs the center $1.50, inventory carrying costs are 20 percent, and the cost of placing an order with it su..
calculation of external funds needed by the company.in april 1991 the owner and manager of pops recycling company j. r.
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