Lesson #8, Assignment #2 - Chapter 16 Stephenson Real...

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Chapter 16 Stephenson Real Estate Recapitalization Input area: Shares outstanding 15,000,000 Share price $35.20 Purchase price $110,000,000 Increase in pretax earnings $27,000,000 Current cost of capital 12.50% YTM on new debt 8.00% Equity weight in new capital structure 70% Tax rate 40% Output area: 2. Assets $487,500,000 Equity $487,500,000 Total assets $487,500,000 Total Debt & Equity $487,500,000 3. a) Aftertax earnings increase $16,200,000 NPV $19,600,000 b) Assets $487,500,000 NPV of project $19,600,000 Equity $507,100,000 Total assets $507,100,000 Total Debt & Equity $507,100,000 New share price 33.8 New shares issued 3,254,438 Price c) Cash $110,000,000 Old assets $487,500,000 NPV of project $19,600,000 Equity $617,100,000 Total assets $617,100,000 Total Debt & Equity $617,100,000 Total New shares outstanding 18,254,438 New share price $33.80 d) PV of the project $120,000,000 Old assets $487,500,000 PV of project $120,000,000 Equity $607,500,000 Total assets $607,500,000 Total Debt & Equity
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This note was uploaded on 04/29/2011 for the course FINANCE BA521 taught by Professor Mark during the Spring '11 term at Antelope Valley College.

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Lesson #8, Assignment #2 - Chapter 16 Stephenson Real...

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