**Value of Equity after Recapitalization**Nichols Corporation's value of operations is equal to $650 million after a recapitalization (the firm had no debt before the recap). It raised $260 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recapitalization. After the recapitalization, $ w_d = 40\% $. What is $ S $ (the value of equity after the recap)? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.\$ [Blank] million**Check My Work** (10 remaining)

Value of equity after recap is calculated using following equation Value of operations after recap =…

Nichols Corporation's value of operations is equal to $650 million after a recapitalization (the firm had no debt before the recap). It raised $260 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, Wd = 40%. What is S (the value of equity after the recap)? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number. A million

Nichols Corporation's value of operations is equal to $650 million after a recapitalization (the firm had no debt before the recap). It raised $260 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, Wd = 40%. What is S (the value of equity after the recap)? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number. A million

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company just issued $453000 of perpetual 5% debt and used the proceeds to repurchase stock. The company expects to generate 107000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 14% and the tax rate is 25%. Use APV method to calculate the value of the company with leverage. Your Answer: Answer
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Weston Corporation just paid a dividend of $2.5 a share (i.e., Do = $2.5). The dividend is expected to grow 12% a year for the next 3 years and then at 4% a year thereafter. What is the expected dividend per share for each of the next 5 years? Do not round intermediate calculations. Round your answers to the nearest cent. D₁ = $ D₂ = $ D3 = $ D4 = $ D5 = $
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Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? The stock price should be $ (Round to the nearest cent.) A b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cont.) c. Assume you bought Covan stock at the beginning of…

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