Bad company's stock price is $40, and it has 6.0 million shares outstanding. You believe that...

Bad company's stock price is $40, and it has 6.0 million shares outstanding. You believe that if you buy the company and replace its management its value will increase by 43%. Assume that Bad has a poison pill with a 15% triggered all target shareholders-other then the acquirer-will be able to buy one new share in Bad for each share they own as a 50% discount? Assume that while you the price remains at 40 while you are acquiring your buyout shares. If Bad's management decides to resist your buyout attempt and you cross the 15% threshold of ownership.

A. How many new shares will be issued at what price?

B. What will happen to your percentage ownership of Bad?

C. What will happen to the price of your shares of Bad?

D. Do you lose or gain from triggering the poison pill? If you lose where does the loss go (who benefits)? If you gain, where does the gain come from (who loses)?

Expert Solution

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

jeff jeffy answered 1 year ago

Bad company's stock price is $35, and it has 2.0 million shares outstanding. You believe that...

Bad company's stock price is $35, and it has 2.0 million shares outstanding. You believe that if you buy the company and replace its management its value will increase by 16%. Assume that Bad has a poison pill with a 20% triggered all target shareholders-other than the acquirer-will be able to buy one new share in Bad for each share they own as an 80% discount? Assume that the price remains at 35 while you are acquiring your shares. If...

Suppose a firm has 10 million shares of common stock outstanding at a price of $40...

Suppose a firm has 10 million shares of common stock outstanding at a price of $40 per share. The firm also has 300,000 bonds outstanding with a current price of $1050. The outstanding bonds have yield to maturity 7.1%. The firm's common stock beta is 1.4 and the corporate tax rate is 35%. The expected stock market return is 10% and the T-bill rate is 1.5%. What is the WACC for this firm? (Enter your answer to 4 decimal places...

The Belfast Corp. has 40 million shares of common stock with a current market price of...

The Belfast Corp. has 40 million shares of common stock with a current market price of $14.00 per share. They have $270 million in par value of long-term bonds outstanding that currently sell for $935 per $1,000 par value. The bonds have a coupon rate of 7.6% and a maturity of 20 years. Assume annual coupon payments. Horizon also has 1 million shares of preferred stock with a current market price of $108 per share. The dividend on this preferred...

Suppose Bellwood Corp. has 52,000 shares outstanding. The price of the company's stock is $63.55 per...

Suppose Bellwood Corp. has 52,000 shares outstanding. The price of the company's stock is $63.55 per share. Bellwood Corp.'s EPS is $3.55. Total assets is $360,000 and total liabilities is $206,000. Just now, Bellwood Corp. announced a share repurchase for $115,000 of the firm's stock. What is the EPS after the shares are repurchased?

Suppose a firm has 30.20 million shares of common stock outstanding at a price of $45.42...

Suppose a firm has 30.20 million shares of common stock outstanding at a price of $45.42 per share. The firm also has 419,000.00 bonds outstanding with a current price of $1,051.00. The outstanding bonds have yield to maturity 6.52%. The firm's common stock beta is 0.986 and the corporate tax rate is 39.00%. The expected market return is 12.52% and the T-bill rate is 4.00%. Compute the following: a. Weight of equity of the firm: b. Weight of debt of...

Suppose a firm has 34 million shares of common stock outstanding at a price of $15.5...

Suppose a firm has 34 million shares of common stock outstanding at a price of $15.5 per share. The firm also has 100,000 bonds outstanding with a current price of $1171.1. The outstanding bonds have yield to maturity 7.8%. The firm's common stock beta is 2.5 and the corporate tax rate is 38%. The expected market return is 12% and the T-bill rate is 1%. What is the WACC for this firm? Weight of Equity (3 decimals): Weight of Debt...

Q1) Suppose a firm has 16.70 million shares of common stock outstanding at a price of...

Q1) Suppose a firm has 16.70 million shares of common stock outstanding at a price of $23.23 per share. The firm also has 257000.00 bonds outstanding with a current price of $1,013.00. The outstanding bonds have yield to maturity 9.76%. The firm's common stock beta is 1.227 and the corporate tax rate is 35.00%. The expected market return is 9.87% and the T-bill rate is 5.53%. Compute the following: a) Weight of Equity of the firm b) Weight...

Suppose a firm has 19.90 million shares of common stock outstanding at a price of $27.51...

Suppose a firm has 19.90 million shares of common stock outstanding at a price of $27.51 per share. The firm also has 198000.00 bonds outstanding with a current price of $1,015.00. The outstanding bonds have a yield to maturity of 9.02%. The firm's common stock beta is 1.41 and the corporate tax rate is 39.00%. The expected market return is 14.57% and the T-bill rate is 2.93%. Compute the following: -Weight of Equity of the firm -Weight of Debt of the...

Q) Suppose a firm has 40.80 million shares of common stock outstanding at a price of...

Q) Suppose a firm has 40.80 million shares of common stock outstanding at a price of $45.56 per share. The firm also has 151000.00 bonds outstanding with a current price of $1,106.00. The outstanding bonds have yield to maturity 7.18%. The firm's common stock beta is 2.267 and the corporate tax rate is 36.00%. The expected market return is 12.79% and the T-bill rate is 3.05%. Compute the following: a) Weight of Equity of the firm b) Weight of Debt...

Suppose a firm has 29.90 million shares of common stock outstanding at a price of $11.61...

Suppose a firm has 29.90 million shares of common stock outstanding at a price of $11.61 per share. The firm also has 103000.00 bonds outstanding with a current price of $1,087.00. The outstanding bonds have yield to maturity 8.75%. The firm's common stock beta is 1.504 and the corporate tax rate is 38.00%. The expected market return is 13.80% and the T-bill rate is 5.97%. Compute the following: a) Weight of Equity of the firm b) Weight of...

Question