Hello,

Please answer this question with the FCF

Question 9 - Numeric The board of directors of Cowbell Inc. is considering conducting a levered recapitalization. The firm currently has no outstanding debt and a cost of equity of 12%. Currently, the firm has 10mn shares outstanding. However, as part of the planned recapitalization, Cowbell would issue a new 10-year bond with a face value of $100mn and use all the proceeds from the debt issuance to repurchase shares. The board of directors believes that increasing Cowbell's leverage will benefit investors in two ways: First, the firm will be able to reap valuable tax shields. Second, the board expects that managers will be incentivized to reduce costs as a result of this transaction. The board is not concerned about financial distress costs or agency costs. Analysts have estimated that Cowbell's new bond would likely be rated AA by S&P and the average yield of long-term AA rated bonds is currently 4.5%. The table below provides forecasts and data for Cowbell with and without the bond issuance. Assume that FCF grows at 3% after year 1 in either case and that Cowbell's marginal tax rate is 35%. Assume that Cowbell's investors do not pay taxes on dividends, capital gains, or interest income. Financial forecasts in $1,000 Before Bond Issuance Financial forecasts in $1,000 After Bond Issuance Year Revenues Costs of Goods Sold SG&A Expenses Depreciation CAPX ANWC part A 1 $250,000 $125,000 $37,500 $17,500 $21,300 $150 Year Revenues Costs of Goods Sold SG&A Expenses Depreciation CAPX ANWC 1 $250,000 $120,000 $35,000 $17,500 $21,300 $150 If Cowbell proceeds with this transaction, how many shares will it be able to repurchase and at what share price will it repurchase these shares?