Question

Kurz Manufacturing is currently an​ all-equity firm with

1717

million shares outstanding and a stock price of

$ 5.00$5.00

per share. Although investors currently expect Kurz to remain an​ all-equity firm, Kurz plans to announce that it will borrow

$ 50$50

million and use the funds to repurchase shares. Kurz will pay interest only on this​ debt, and it has no further plans to increase or decrease the amount of debt. Kurz is subject to a

30 %30%

corporate tax rate.  

a. What is the market value of​ Kurz's existing assets before the​ announcement?

b. What is the market value of​ Kurz's assets​ (including any tax​ shields) just after the debt is​ issued, but before the shares are​ repurchased?

c. What is​ Kurz's share price just before the share​ repurchase? How many shares will Kurz​ repurchase?

d. What are​ Kurz's market value balance​ sheet, and share price after the share​ repurchase?

a. What is the market value of​ Kurz's existing assets before the​ announcement?

The market value of​ Kurz's existing assets before the announcement is

​$nothing

million. ​ (Round to one decimal​ place.)

b. What is the market value of​ Kurz's assets​ (including any tax​ shields) just after the debt is​ issued, but before the shares are​ repurchased?

The market value of​ Kurz's assets​ (including any tax​ shields) just after the debt is​ issued, but before the shares are repurchased is

​$nothing

million.  ​(Round to one decimal​ place.)

c. What is​ Kurz's share price just before the share​ repurchase? How many shares will Kurz​ repurchase?

​Kurz's share price just before the share repurchase is

​$nothing.

​ (Round to the nearest​ cent.)                 The number of shares that Kurz will repurchase is

nothing

million. ​ (Round to two decimal​ places.)

d. What are​ Kurz's market value balance​ sheet, and share price after the share​ repurchase?

The market value of assets is

​$nothing

million.  ​(Round to one decimal​ place.)The debt is

​$nothing

million. ​ (Round to the nearest​ integer.)The market value of equity is

​$nothing

million.  ​(Round to one decimal​ place.)Share price after repurchase is

​$nothing.

​(Round to two decimal

places​.)

Enter your answer in each of the answer boxes.

Answer 1