Baruk Industries has no cash and a debt obligation of $36 million that is now due. The

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Baruk Industries has no cash and a debt obligation of $36 million that is now due. The market value of Baruk’s assets is $81 million, and the firm has no other liabilities. Assume perfect capital markets.

a. Suppose Baruk has 10 million shares outstanding. What is Baruk’s current share price?

b. How many new shares must Baruk issue to raise the capital needed to pay its debt obligation?

c. After repaying the debt, what will Baruk’s share price be?

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Corporate Finance

ISBN: 9780137845071

6th Edition

Authors: Jonathan Berk, Peter DeMarzo

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