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Fiscal Year Ending Assets Debt Shares Revenue EBIT 2/28/2019 18,602,400,000 9,238,100,000 227,452,000 7,331,500,000 2,422,600,000 Task #1: Based on the data above, compute the following values:

Fiscal Year Ending Assets Debt Shares Revenue EBIT
2/28/2019 18,602,400,000 9,238,100,000 227,452,000 7,331,500,000 2,422,600,000

Task #1: Based on the data above, compute the following values:

Debt/Assets ratio
Debt/Equity ratio

Earnings per share

Interest rate on debt

Value of Interest Tax Shield

Task #2: Consider the following scenario:

The management team is considering the possibility of increasing the firm's use of debt capital.

They propose to implement a leveraged repurchase, under which the firm would buy back 10% of the outstanding shares,

issuing Long-term debt as needed to finance the transaction

Repurchase ratio =

10.00%

How many shares would be repurchased?

ANSWER:

How much would the firm need to borrow to fund this purchase (ignoring transaction costs and market price effects)?

ANSWER:

Based on the interest rate estimated in Task #1, how much (in dollars) would this add to the annual interest expense?

ANSWER:

Under this proposal, calculate the following (assuming the proposed transaction has been completed):

Shares outstanding

Debt
Interest Expense
Net Income

Earnings per share

Debt/Assets ratio
Debt/Equity ratio

Value of Interest Tax Shield

Breakeven EBIT

How much would the proposed restructuring add to the value of the firm?

ANSWER:

Do you think the proposed restructuring should proceed? Why or why not?

ANSWER:

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