Question
OrangeTree Corporations value of operations is estimated to be $550 million. OrangeTree has $100 million in debt (it has no preferred stock) and 10 million
OrangeTree Corporations value of operations is estimated to be $550 million. OrangeTree has $100 million in debt (it has no preferred stock) and 10 million shares of common stock outstanding. Suppose OrangeTree has decided to distribute $50 million, which it presently is holding in very liquid short-term investments.
a Assume that OrangeTree has not yet made the distribution. What is OrangeTrees intrinsic value of equity? What is its intrinsic per share stock price?
b Now, suppose that OrangeTree has just made the $50 million distribution in the form of dividends. What is OrangeTrees intrinsic per share stock price after this dividend payment?
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Financial Valuation Workbook
Authors: James Hitchner, Michael J. Mard
1st Edition
0471220833, 978-0471220831
