Unformatted text preview: Solution: Computation of the Market Value of the Firm After Changing the Capital Structure Total no of shares outstanding 25 Millions No of shares can buy back 16 Millions No of shares still Outstanding 9 Millions Market Value of the Firm = Debt + Equity Debt 160 Millions Equity 90 Millions Market Value of the Firm = 250 Millions Hence the Market Value of the Firm is 250 Millions d. What is the debt ratio after the change in structure? Solution: Computation of the Debt Ratio After Change in Structure Debt 160 Millions Equity 90 Millions Debt Ratio = 0.64 Hence the Debt Ratio is 0.64 e. Who (if anyone) gains or loses? Solution: No one Can Gain and No one Can Loss...
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This note was uploaded on 07/06/2011 for the course MT 480 taught by Professor Weaver during the Spring '11 term at Kaplan University.
- Spring '11