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Author Question: Wally's Widgets International (WWI) is the world's largest manufacturer of widgets. At the end of ... (Read 18 times)

P68T

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on: Apr 25, 2021
Wally's Widgets International (WWI) is the world's largest manufacturer of widgets. At the end of the current year, analysts expect WWI's EBIT to be $2M and they expect the same earnings annually in perpetuity. WWI's shareholders require a return of 10% and there are 5M common shares outstanding. WWI has debt with a total face value of $5M. The bonds have an annual coupon of 5%, are rated AAA and yield 5%. The CFO of WWI believes that the company is under-levered. To increase the leverage, the CFO proposes to repurchase 1M shares at a price of $1.50 per share. The repurchase will be financed by additional borrowing. The corporate tax rate is 40%. What is the value of the company prior to the repurchase, and what is the stock price after the repurchase?
◦ Value (prior) = $15.5M; Stock price (after) = $2.40
◦ Value (prior) = $12.5M; Stock price (after) = $2.03
◦ Value (prior) = $14.5M; Stock price (after) = $1.62
◦ Value (prior) = $12.5M; Stock price (after) = $1.62
◦ Value (prior) = $14.5M; Stock price (after) = $3.65
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by P68T on Apr 25, 2021

ndhahbi

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Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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P68T

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Reply 2 on: Apr 25, 2021
Gracias!

bbburns21

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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