The management of Webster Labs decided to go private in 2003 by buying all $3 million outstanding shares at $18.50 per share. By 2005 management had restructured the company by selling the petroleum research division for $16 million, the fiber technology division for $9.5 million, and the synthetic products division for $20 million dollar.

Because these devisions had been only marginally profittable, Webster Labs is a stronger company after the restructuring. Webster Lab is now able to concentrate exclusively on the contract research and will generate earning per share of $1.50 this year. Investement dealers have contacted the firm and indicated that, if it returned to be a public market, the $3 million shares it purchased to go private could now be reissued to the public at a P/E ratio of 14 times earnings per share.

a. What was the initial total cost to Webster Labs to go private? (Enter your answer in millions. Round your answere to 1 decimal place.)

Initial cost: $________________million

b. What is the total value to the company from (1) the proceeds of the division that were sold, and (2) the current value of the 3 millions shares (based on the current earnings and an anticipated P/E of 14)? (Enter your answer in millions. Round your answere to 1 decimal place.)

Total value to the company $_______________________million

c. What is the percentage return to the management of Webster Labs from the restructuring? Use answers from parts a and b to determine this value. (Round your answer to 2 decimal places.)

Percentage return _____________%