Digital Fruit is financed solely by common stock and has outstanding 43 million shares with a market price of $10 a share. It now announces that it intends to issue $340 million of debt and to use the proceeds to buy back common stock. There are no taxes. a. What is the expected market price of the common stock after the announcement? b. How many shares can the company buy back with the $340 million of new debt that it will issue? Note: Enter your answer in millions rounded to 1 decimal place. c. What is the market value of the firm (equity plus debt) after the change in capital structure?
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- Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?Digital Fruit is financed solely by common stock and has outstanding 27 million shares with a market price of $10 a share. It now announces that it intends to issue $180 million of debt and to use the proceeds to buy back common stock. There are no taxes. a. What is the expected market price of the common stock after the announcement? b. How many shares can the company buy back with the $180 million of new debt that it will issue? (Enter your answer in millions rounded to 1 decimal place.) c. What is the market value of the firm (equity plus debt) after the change in capital structure? (Enter your answer in millions.) d. What is the debt ratio after the change in capital structure? (Enter your answer as a whole percent.)Consider this example: Shares of Ex Why Zee, Inc. (ticker symbol: XYZ) are currently trading at $6 per share. XYZ plans to issue $6M in short term debt and use the money they borrow to repurchase $6M worth of their own stock. What effect will the debt issuance and share repurchase have on the balance sheet? There isn't enough information to answer this question Assets will increase by $6M Liabilities will decrease by $6M Number of Shares Outstanding will increase by 1 million Equity will decrease by $6M
- Executive Chalk is financed solely by common stock and has outstanding 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt and to use the proceeds to buy back common stock. a. How is the market price of the stock affected by the announcement? b. How many shares can the company buy back with the $160 million of new debt that it issues? Note: Enter your answer in millions. c-1. What is the market value of the firm (equity plus debt) after the change in capital structure? Note: Enter your answer in millions. c-2. Did the market value of the firm change? d. What is the debt ratio after the change in structure? Note: Round your answer to 2 decimal places. e. Who (if anyone) gains or loses? a. Effect on market price b. Shares repurchased c-1. Market value c-2. Did the market value of the firm change? d. Debt ratio e. Who (if anyone) gains or loses? Stock price remains the same. 160 million 250 million $ No 1.78 No one gains or…Executive Cheese has issued debt with a market value of $100 million and has outstanding 15 million shares with a market price of $10 a share. It now announces that it intends to issue a further $60 million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $70 million.a. How is the market price of the stock affected by the announcement?b. How many shares can the company buy back with the $60 million of new debt that it issues?c. What is the market value of the firm (equity plus debt) after the change in capital structure?d. What is the debt ratio after the change in structure?e. Who (if anyone) gains or loses?ABC SA. is financed solely by equity. Currently, the company has 20 million sharesoutstanding. These shares are listed in Euronext at 10€/share. The executive management teamannounced the aim of issuing 40 million euros in debt and using the proceeds to buy own shares(a share buyback program).a) What consequences on the market price do you anticipate, because of this announcement(provide the corresponding rationale for your answer)?b) How many shares can the company buy back with the proceeds from the debt issue?c) Following the change in financial structure, what will be the company’s market value (equityplus debt)?d) What level will the debt ratio reach after the change in financial structure?e) With this change in financial structure, is the cost of equity expected to increase, decrease,or stay at the same level? Justify.
- The Dunn Corporation is planning to pay dividends of $540000. There are 270000 shares outstanding, and earnings per share are $4. The stock should sell for $48 after the ex-dividend date. If, instead of paying a dividend, the firm decides to repurchase stock,a. What should be the repurchase price? b. How many shares should be repurchased? c. What if the repurchase price is set below or above your suggested price in part a? d. If you own 100 shares, would you prefer that the company pay the dividend or repurchase stock? a. 3/10, net 45 b. 3/15 net 30 c. 3/15 net 60 d.2/10 net 45If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.Executive Cheese has issued debt with a market value of $100.56 million and has outstanding 15.60 million shares with a market price of $10 a share. It now announces that it intends to issue a further $55.44 million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $60 million. a-1. Calculate the market price of the stock following the announcement. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a-2. How is the market price of the stock affected by the announcement? b. How many shares can the company buy back with the $55.44 million of new debt that it issues? (Do not round intermediate calculations. Enter your answer in millions. Round your answer to 1 decimal place.) c-1. What is the market value of the firm (equity plus debt) after the change in capital structure? (Do not round intermediate calculations. Enter your answer in millions. Round your answer…
- Company B has a net incme $2million and has 1 million shares. the company is considering a plan to repurchased 20% of its shares in open market. share price is trading at $32 per share. Currently the repurchased is expected to have no effect on its net income and PE ratio. what will be the stock pricefollowing the stock repurchased?See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)Executive Cheese has issued debt with a market value of $100 million and has outstanding 15 million shares with a market price of $10 a share. It now announces that it intends to issue a further $60 million of debt and to use the proceeds to buy back common stock. Debtholders, seeing the extra risk, mark the value of the existing debt down to $85 million. Question: What is the debt ratio after the change in structure?