Question
Tardy Navigators (TN) has 20 million shares outstanding with a current market price of $15 per share and no debt. It has had stable earnings
Tardy Navigators (TN) has 20 million shares outstanding with a current market price of $15 per share and no debt. It has had stable earnings and a 21% tax rate. The CFO plans to borrow $100 million on a permanent basis and use the borrowed funds to repurchase outstanding shares.
What is the value of the firm before the recapitalization?
What is the value of the interest tax shield?
What is the value of the levered firm?
Upon announcement of the repurchase, what will the new share price be?
How many shares will be outstanding after the CFO repurchases shares?
What will happen if the company offers to tender the shares for a price higher than the optimal price?
What will happen if the company offers to tender shares for a lower price than the optimal price?
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Advanced Models And Tools For Effective Decision Making Under Uncertainty And Risk Contexts
Authors: Vicente González-Prida, María Carmen Carnero
1st Edition
1799832465,179983249X
