Suppose Corporation F stock is currently trading at $40 per share. There are 20 million shares...

Suppose Corporation F stock is currently trading at $40 per share. There are 20 million shares outstanding, and the company has no debt. You are a partner in a firm that specializes in leveraged buyouts. Your analysis indicates that the management of this corporation could be improved considerably. If the managers were replaced with more capable ones, you estimate that the value of the company would increase by 50%. You decide to initiate a leverage buyout and issue a tender offer for at least a controlling interest 50% of the outstanding shares. What is the maximum amount of value you can extract and still complete the deal? What if you borrowed more than $400 million? Assume you were able to borrow $450 million. The value of equity after the merge would be?

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jeff jeffy answered 1 year ago

Suppose the stock of Jagdambay Exports Corporation is currently trading at $20 per share. a) ...

Suppose the stock of Jagdambay Exports Corporation is currently trading at $20 per share. a) If company issued a 20% stock dividend, what will its new price be? b) If company does a 3:2 stock split, what will its new share price be? c) If company does a 1:3 reverse split, what will its new share price be?

Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding....

Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $40 per share. Q: If the under writing spread is 6% and the other administrative costs are $60,000, what is the dollar value of the total direct costs of the issue? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your...

Valley Corp.'s stock is currently selling at $40 per share. There are 1 million shares outstanding....

Valley Corp.'s stock is currently selling at $40 per share. There are 1 million shares outstanding. The firm is planning to raise $2 million to finance a new project. What are the ex-rights stock price, the value of a right, and the appropriate subscription prices under the following scenarios? a. Two shares of outstanding stock are entitled to purchase one additional share of the new issue. (Do not round intermediate calculations and round your answers to 2 decimal places,...

Kahuku Corporation has 100 million shares outstanding trading at $20 per share. The company announces its...

Kahuku Corporation has 100 million shares outstanding trading at $20 per share. The company announces its intention to raise $150 million by selling new shares. a. What do market signaling studies suggest will happen to Kahuku’s stock price on the announcement date? Why? b. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing Kahuku shareholders will experience on the announcement date? c. What percentage of the value of Kahuku’s existing equity prior to...

The stock of Nogro Corporation is currently selling for $20 per share. Earnings per share in...

The stock of Nogro Corporation is currently selling for $20 per share. Earnings per share in the coming year are expected to be $3.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn an 18% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using...

Suppose the stock of Host Hotels & Resorts is currently trading for $ 15 per share....

Suppose the stock of Host Hotels & Resorts is currently trading for $ 15 per share. a. If Host issued a 20 % stock dividend, what will its new share price be? b. If Host does a 3 : 2 stock split, what will its new share price be? c. If Host does a 1 : 3 reverse split, what will its new share price be?

3. Foster Enterprises' stock is trading for $43 per share and there are currently 12 million...

3. Foster Enterprises' stock is trading for $43 per share and there are currently 12 million shares outstanding. It would like to raise $95 million. If its underwriter charges 7% of gross proceeds, a. How many shares must it sell? b. If it expects the stock price to drop by 1% upon announcement of the SEO, how many shares should it plan to sell? c. If all of the shares are primary shares and are sold to new investors, what...

Corporation X common stock is trading at $200 a share and it has 1 million shares...

Corporation X common stock is trading at $200 a share and it has 1 million shares outstanding. The stock’s beta is 1.2, the risk-free rate 2%, and the market portfolio is expected to return 9%. Their debt consists of two issues of bonds: Issue Maturity (years) Coupon (%) Market value (% of par) Amount outstanding (million $) A 15 8% 101 50 B 25 10% 102 40 Assuming Corporation X is subject to a 21% corporate tax rate, please find...

HH Industries has 50 million shares that are currently trading for $4 per share and $200...

HH Industries has 50 million shares that are currently trading for $4 per share and $200 million worth of debt. The debt is risk free and has and interest rate of 5%, and the expected return of HH stock is 11%. Suppose a strike causes the price of HH stock to fall 25% to $3 per share. The value of the risk free debt is unchanged. Assuming there are no taxes and the risk of HH's assets is unchanged, what...

Piper Co has 40 million shares outstanding, trading for $10 per share. In addition, the firm...

Piper Co has 40 million shares outstanding, trading for $10 per share. In addition, the firm has $106 million in outstanding debt. Suppose the equity cost of capital is 15%, its debt cost of capital is 8% and the tax rate is 40%: a) What is the WACC? b)If the risk free rate is 15% and the Rm is 9%, what are the leveraged and unleveraged betas?

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