Rally, Inc., is an all-equity firm with assets worth $ 31 billion and 13 billion shares...

Rally, Inc., is an all-equity firm with assets worth $ 31 billion and 13 billion shares outstanding. Rally plans to borrow $ 18 billion and use funds to repurchase shares. Rally's corporate tax rate is 35 %, and Rally plans to keep its outstanding debt equal to $ 18 billion permanently.

a. Without the increase in leverage, what would be Rally's share price?

Without the increase in leverage, Rally's share price is $____. (Round to the nearest cent.)

b. Suppose Rally offers $ 2.65 per share to repurchase its shares. Would shareholders sell for this price?

c. Suppose Rally offers $ 2.98 per share, and shareholders tender their shares at this price. What will be Rally's share price after the repurchase?

d. What is the lowest price Rally can offer and have shareholders tender their shares? What will be its stock price after the share repurchase in that case?

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago

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Rally, Inc., is an all-equity firm with assets worth $ 31 billion and 13 billion shares...

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​Rally, Inc., is an​ all-equity firm with assets worth $ 31 billion and 13 billion shares...

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