1. The following data apply to Hill's Hiking Equipment: (in millions)

Value of operations $40,000

Short-term investments $2,000

Debt $12,000

Number of shares 300

The company plans on distributing $2000 million as dividend payments. What will the intrinsic per share stock price be immediately after the distribution?

Alternatively, the company plans on distributing $2,000 million by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase?

2. Simon Corporation is considering the acquisition of Ingram Company. Ingram has a capital structure

consisting of $7.5 million (market value) of 11% bonds and $15 million (market value) of common stock.

Ingram's pre-merger beta is 1.36. Simon's beta is 1.02, and both it and Ingram face a 40% tax rate.

Simon's capital structure is 40% debt and 60% equity. The free cash flows from Ingram are estimated to be

$4.5 million for each of the next 4 years and a horizon value of $15 million in Year 4. Tax savings are

estimated to be $1.5 million for each of the next 4 years and a horizon value of $7.5 million in Year 4. New debt

would be issued to finance the acquisition and retire the old debt, and this new debt would have an interest rate of

8%. Currently, the risk-free rate is 6.0% and the market risk premium is 4.0%.

What Ingrams pre-merger WACC?

3. Busirk Office Supplies, Inc., buys on terms of 2/15, net 50 days. It does not take discounts, and it typically pays on time, 50 days after the invoice date. Net purchases amount to $675,000 per year. On average, what is the amount of costly trade credit firm receives during the year? (Assume a 365-day year, and that purchases are net of discounts.)