Mercer Corp, has 10 million shares outstanding and $111 milion worth of debt outstanding, its current stare price is $73. Mercers equity cost of capital is 8.5%. Mercer has just announced that it will issue $3%6 million worth of debt. It will use the proceeds from this debt to pay off sexisting debt, and use the remaining $285 million to pay an immediale dividend. Assume perfect capital markets a. Estimate Mercer's share price just after the recapitalization is announced, but before the transaction occurs. b. Estimate Mercer's share prices the conclusion of the transaction (int: Use the market value balance sheet:) c. Suppose Mercer's existing debt was risk free with a 444% expected retum, and a new debt is risky with a 4.52%xpected retur. Etimate Mercers couity cost of capital after the transaction a Estimate Were's where price just after the recapitation is announced, but before the action cours Mercer's share prices after the recapitalization is announced, but before the transaction cours is $ (Pound to the nearest dolar) b. Estimate Maroer's share price at the condusion of the transaction. (Het Use the market value balance sheet) Mercer'e thare price at the conclusion of the transaction in $(Round to the nearest cont.) c. Suppose Mercer's existing debt was risk free wiha 4.44% expected rotun, and is new debt is risky with 4.82% expected retum. Estinale Mercer's equity cost of capital after the transaction Mercer's couty cont of capital her the transaction is 1% (Round to two decimal places) Mercer Corp, has 10 million shares outstanding and $111 milion worth of debt outstanding, its current stare price is $73. Mercers equity cost of capital is 8.5%. Mercer has just announced that it will issue $3%6 million worth of debt. It will use the proceeds from this debt to pay off sexisting debt, and use the remaining $285 million to pay an immediale dividend. Assume perfect capital markets a. Estimate Mercer's share price just after the recapitalization is announced, but before the transaction occurs. b. Estimate Mercer's share prices the conclusion of the transaction (int: Use the market value balance sheet:) c. Suppose Mercer's existing debt was risk free with a 444% expected retum, and a new debt is risky with a 4.52%xpected retur. Etimate Mercers couity cost of capital after the transaction a Estimate Were's where price just after the recapitation is announced, but before the action cours Mercer's share prices after the recapitalization is announced, but before the transaction cours is $ (Pound to the nearest dolar) b. Estimate Maroer's share price at the condusion of the transaction. (Het Use the market value balance sheet) Mercer'e thare price at the conclusion of the transaction in $(Round to the nearest cont.) c. Suppose Mercer's existing debt was risk free wiha 4.44% expected rotun, and is new debt is risky with 4.82% expected retum. Estinale Mercer's equity cost of capital after the transaction Mercer's couty cont of capital her the transaction is 1% (Round to two decimal places)
