vviral is tie comparly s currem vvAUU?

Correct $$

Since the company doesn't have any debt, the WACC equals the cost of equity, which we can find using the

CAPM:

WACC$=r_E=r_f+[E(r_M)-r_f]$

$=0\mathrm{.}011+1\mathrm{.}2[0\mathrm{.}05-0\mathrm{.}011]$

$=0\mathrm{.}0578$

Par: $4$

How much debt does the company want to issue $($in $ million$)?$

Correct $$

Since companies typically issue bonds at par, the bond price is just $$1,000.$

Market value of debt:

$D=$ Number of bonds ${?}^{**}$ Bond price

$=84,000**1,000$

$=84($million$)$

Part $5$

What is the annual interest tax shield of the debt $($in $ million$)?$

Correct $$

Annual interest tax shield $=D*[r-d]*t.$ The cost of debt, $r_D,$ equals the expected yield on the bonds,

which will be the same as the bond yields of similar companies:

$D*r_D*t=84*0\mathrm{.}05*0\mathrm{.}34=1\mathrm{.}428(million)$ What is the value of the company after the restructuring $($in $ million$)?$

Part $7$

What is the new value of equity $($in $ million$)?$

Peri$8$

What is the new stock price?

Par$9$

How many shares will be outstanding after the restructuring $($in million$)?$Intro

Roxie Corp. currently has $8$ million shares outstanding, trading at $$23\mathrm{.}51.$ The stock's beta is $1\mathrm{.}2.$ The book value

of equity is $$56\mathrm{.}42$ million, and the book value of long$-$term debt is $0.$ Treasuries yield $1\mathrm{.}1\%$ and the expected

return on the S&P $500$ is $5\%.$

The company is thinking of issuing $84,000$ bonds with a par value of $$1,000$ to repurchase its own stock. The

yield to maturity on similar bonds issued by other companies is $5\%.$ The average tax rate is $34\%.$

Part $1$

Attempt $\frac{1}{99}$ for $10$ pts$.$

What is the current market value of equity $($in $ million$)?$

Correct $$

Market value of equity:

$E=$ Stock price $*$ Number of shares outstanding

$={23\mathrm{.}51}^{**}8$

$=188\mathrm{.}08($million$)$

The market value of equity is also called the company's market capitalization.

Part $2$

What is the total current value of the company before announcing the restructuring $($in $ million$)?$

Correct $$

For an unlevered firm, the value of the firm equals the value of equity:

$V_U=E=188\mathrm{.}08(million)$

PLEASE FIND ALL PARTS $6-9$