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 8 months ago

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