Question
In: Finance
Kurz Manufacturing is currently an all-equity firm with 31 million shares outstanding and a stock price...
Kurz Manufacturing is currently an all-equity firm with 31 million shares outstanding and a stock price of $13.50 per share. Although investors currently expect Kurz to remain an all-equity firm, Kurz plans to announce that it will borrow $60 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 25% 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?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Kurz Manufacturing is currently an all-equity firm with 3535 million shares outstanding and a stock price...
Kurz Manufacturing is currently an all-equity firm with
3535
million shares outstanding and a stock price of
$ 11.50$11.50
per share. Although investors currently expect Kurz to remain
an all-equity firm, Kurz plans to announce that it will borrow
$ 45$45
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
38 %38%
corporate tax...
Kurz Manufacturing is currently an all-equity firm with 38 million shares outstanding and a stock price...
Kurz Manufacturing is currently an all-equity firm with
38 million shares outstanding and a stock price of $14.50 per
share. Although investors currently expect Kurz to remain an
all-equity firm, Kurz plans to announce that it will borrow $35
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%
corporate tax rate.
a. What...
Kurz Manufacturing is currently an all-equity firm with 37 million shares outstanding and a stock price...
Kurz Manufacturing is currently an all-equity firm with
37
million shares outstanding and a stock price of
$11.50
per share. Although investors currently expect Kurz to remain
an all-equity firm, Kurz plans to announce that it will borrow
$65
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
38%
corporate tax rate.
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per share. Although investors currently expect Kurz to remain
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million and use the funds to repurchase shares. Kurz will pay
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