Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 16, Problem 4P
Value of Equity after Recapitalization
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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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 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.
$
million
Check My Work (10 remaining)
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)?
7. Problem 15-07 (Value of Equity after Recapitalization)
eBook
Value of Equity after Recapitalization
BA
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, wa = 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.
million
$
Chapter 16 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 16 - Prob. 1QCh. 16 - Prob. 2QCh. 16 - Prob. 3QCh. 16 - One type of leverage affects both EBIT and EPS....Ch. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - Prob. 9QCh. 16 - Prob. 1P
Ch. 16 - Unlevered Beta
Counts Accounting’s beta is 1.15...Ch. 16 - Premium for Financial Risk
Ethier Enterprise has...Ch. 16 - Value of Equity after Recapitalization Nichols...Ch. 16 - Stock Price after Recapitalization Lee...Ch. 16 - Prob. 6PCh. 16 - Prob. 7PCh. 16 - Capital Structure Analysis Pettit Printing Company...Ch. 16 - Optimal Capital Structure with Hamada
Beckman...Ch. 16 - WACC and Optimal Capital Structure F. Pierce...Ch. 16 - Prob. 12PCh. 16 - Prob. 1MCCh. 16 - Prob. 2MCCh. 16 - Prob. 3MCCh. 16 - Prob. 4MCCh. 16 - Prob. 5MCCh. 16 - Prob. 6MCCh. 16 - What does the empirical evidence say about capital...Ch. 16 - Suppose there is a large probability that L will...Ch. 16 - What is the value of Ls stock for volatilities...
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- Stock Price after Recapitalization Lee Manufacturings value of operations is equal to 900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised 300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, wd = 1/3. The firm had 30 million shares before the recap. What is P (the stock price after the recap)?arrow_forwardA firm’s value of operations is equal to $800 million after arecapitalization. (The firm had no debt before the recap.) Thefirm raised $200 million in new debt and used this to buy backstock. The firm had no short-term investments before or after therecap. After the recap, wd = 25%. The firm had 10 million sharesbefore the recap. What is S (the value of equity after the recap)?($600 million) What is PPost (the stock price after the recap)?($80/share) What is nPost (the number of remaining shares afterthe recap)? (7.5 million)arrow_forwardLee Manufacturing's value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, wd = 1/3. The firm had 34 million shares before the recap. What is the stock price after the recap?arrow_forward
- give excel solutionarrow_forwardLee Manufacturing’s value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million innew debt and used this to buy back stock. Lee had no short-term investmentsbefore or after the recap. After the recap, wd = 1/3. The firm had 30 millionshares before the recap. What is P (the stock price after the recap)?arrow_forwardRian Corporation is currently working without using debt. The estimated operating profit per year is $16.065,180.00 while the equity capitalization rate (ke) is 18% pa. In the coming year, Rian is considering replacing some of his shares with a debt of $50 million, with an interest rate of 15% per annum. Question: a. Calculate the value of own capital capitalization (CS), the total capitalization value of the company (V), and the overall capitalization rate (ko) using the Net Income Approach. b. Calculate the amount of equity capitalized value, total capitalization value of the company, and overall capitalization rate using the traditional approach, if additional debt causes the equity capitalization rate (ke) to increase to 20%. c. Draw a graph of the two approaches.arrow_forward
- Suppose First National Bank has $500 million of assets and $ $75 million of equity capital. If First National Bank has a 5% return on assets (ROA), what is its return on equity (ROE)? A. 35% B. 33.3% C. 25% D. None of the abovearrow_forwardThe calculation for the cost of equity using the interpolation method should be provided in the solution.arrow_forwardAn unlevered firm has expected earnings of $4,780,000 and a market value of equity of $56,478,000. The firm is planning to issue $22,591,200 of debt at 5.1 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase? 10.71% 10.58% 10.45% 10.32% 10.19%arrow_forward
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