Bethlehema Steel is a publicly traded steel company with $

$60$

$$million in outstanding debt and $

$40$

$$million in market value of equity. Assuming the

firm is correctly priced. The firm's cost capital currently is

$12$

$\%$

$$and is expected to generate $

$16$

$$million in EBIT

$(1$

$-$

T

$)$

$$next year. The firm is expected

to grow in stable growth at

$4$

$\%$

$$a year in perpetuity. To support the growth, the firm needs to invest

$50$

$\%$

$$of its EBIT

$(1$

$-$

T

$)$

$$in fixed assets and working

capital. You believe if you acquire the control of the firm, you can sell idle assets for $

$40$

$$million and lower the cost of capital to

$10$

$\%$

$($

Plan A

$)$

$.$

What would be the new value of the firm if you obtain control and successfully implement your restructuring plan A

$?$

a

$.$

$100$

b

$.$

$133\mathrm{.}33$

C

$.$

$160$

d

$.$

$320$

QUESTION

$3$

Questions

$2$

$-$

$6$

$$are based on the following description about Bethlehema Steel Company.

Bethlehema Steel is a publicly traded steel company with $

$60$

$$million in outstanding debt and $

$40$

$$million in market value of equity. Assuming the

firm is correctly priced. The firm's cost capital currently is

$12$

$\%$

$$and is expected to generate $

$16$

$$million in EBIT

$(1$

$-$

T

$)$

$$next year. The firm is expected

to grow in stable growth at

$4$

$\%$

$$a year in perpetuity. To support the growth, the firm needs to invest

$50$

$\%$

$$of its EBIT

$(1$

$-$

T

$)$

$$in fixed assets and working

capital. You believe if you acquire the control of the firm, you can sell idle assets for $

$40$

$$million and lower the cost of capital to

$10$

$\%$

$($

Plan A

$)$

$.$

What would be the value of control if following the restructuring plan A

$?$

a

$.$

$33\mathrm{.}33$

b

$.$

$60$

C

$.$

$73\mathrm{.}33$

d