You have been asked to estimate the value per share after a buyback. The company is named Nästorp Mechanical AB, it has 100 million shares which are trading at SEK 26.4/share. The company doesn't have any debt and a cost of equity of 10%. You believe that if the company is able to borrow SEK 300 million and buy back shares, the cost of capital will drop to 8%. If there is no growth in the savings (from a lower cost of capital) and the shares are bought back at SEK 10.50/share. Answer with two decimals.
You have been asked to estimate the value per share after a buyback. The company is named Nästorp Mechanical AB, it has 100 million shares which are trading at SEK 26.4/share. The company doesn't have any debt and a cost of equity of 10%. You believe that if the company is able to borrow SEK 300 million and buy back shares, the cost of capital will drop to 8%. If there is no growth in the savings (from a lower cost of capital) and the shares are bought back at SEK 10.50/share. Answer with two decimals.
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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Transcribed Image Text:You have been asked to estimate the value per share after a buyback. The company is named Nästorp
Mechanical AB, it has 100 million shares which are trading at SEK 26.4/share. The company doesn't have
any debt and a cost of equity of 10%. You believe that if the company is able to borrow SEK 300 million
and buy back shares, the cost of capital will drop to 8%. If there is no growth in the savings (from a
lower cost of capital) and the shares are bought back at SEK 10.50/share. Answer with two decimals.
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