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?