Capital Structure Project - W. M. Wrigley Jr.(10pts * 6 = 60 pts)

For this project, please use Excel to do your calculations and analysis and then type a report in MS Word. Your report should clearly and thoroughly answer the below six questions. The report should be typed double-spaced using a Times New Roman Font, size 12. Please limit your report to no more than 10 pages. Submit your report and Excel file on Blackboard. All of this needs to be completed by the listed due date on the syllabus.

1) What will be the effects of issuing $3 billion of new debt and using the proceeds to pay a dividend on: Wrigley's outstanding shares? on the price per share of Wrigley's stock?

2) What will be the effects of issuing $3 billion of new debt and using the proceeds to repurchase shares on: Wrigley's outstanding shares? on the price per share of Wrigley's stock?

3 ) What is Wrigley's current (pre-recapitalization) weighted average cost of capital (WACC)?

4) What would you expect to happen to Wrigley's WACC if it issued $3 billion in debt and used the proceeds to pay a dividend or to repurchase shares?

5) What will be Wrigley's current EPS (pre-recapitalization) given the following operating incomes? Assume the following numbers are in millions.

Operating income (EBIT)

-$86

$214

$514

$814

$1,114

$1,414

$1,714

6) What would you expect to happen to Wrigley's EPS if it issued $3 billion in debt and: used the proceeds to pay a dividend? used the proceeds to repurchase shares? Calculate the potential EPS's given the following incomes. Assume the numbers are in millions.

Operating income (EBIT)

-$86

$214

$514

$814

$1,114

$1,414

$1,714

Also, what can you conclude regarding the re-capitalization strategies? Do you recommend Wrigley to pay a dividend or repurchase shares. Used data or graphs to support your recommendation.