Picton Plc is an all$-$equity firm with $20$ million shares outstanding. The current share price is

$$7\mathrm{.}50$ per share. Investors expect Picton to remain only equity$-$financed.

Picton has recently established a corporate finance department and they believe they

can increase the value of Picton by restructuring and introducing Debt into their capital

structure. They plan to borrow $$50$ million and use the funds to repurchase shares. The debt

will be perpetual. Picton pays tax at the $32\%$ level.

a$)$ What is the unlevered value of Picton?

b$)$ What will the levered value of Picton be after they announce the restructuring?

c$)$ What is the minimum price that Picton can offer existing shareholders in order for

them to agree to sell their shares back to Picton? How many shares will Picton

repurchase?

d$)$ Suppose Picton offers to buy back the shares for $$9$ a share:

i$.$ Will the existing shareholders agree to sell their shares? Explain briefly

ii$.$ How many shares will Picton buy back? What is the total value of Equity after

the restructure and what will Picton's share price be after the restructure?