Nichols Corporation’s value of operations is equal to $500 million after arecapitalization (the firm had no debt before the recap). It raised $200 millionin 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 valueof equity after the recap)?
Nichols Corporation’s value of operations is equal to $500 million after arecapitalization (the firm had no debt before the recap). It raised $200 millionin 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 valueof equity after the recap)?
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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Nichols Corporation’s value of operations is equal to $500 million after a
recapitalization (the firm had no debt before the recap). It raised $200 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)?
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