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Zetatron is an all-equity firm with 100 million shares outstanding, which are currently trading for $7.50 per share. A month ago, Zetatron announced it will
Zetatron is an all-equity firm with 100 million shares outstanding, which are currently trading for $7.50 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $100 million in short-term debt, borrowing $100 million in long-term debt, and issuing $100 million of preferred stock. The $300 million raised by these issues, plus another $50 million in cash that Zetatron already has, will be used to repurchase existing shares of stock. The transaction is scheduled to occur today. Assume perfect capital markets. a. What is the market value balance sheet for Zetatron I. Before this transaction? ii. After the new securities are issued but before the share repurchase? III. After the share repurchase? b. At the conclusion of this transaction, how many shares outstanding will Zetatron have, and what will the value of those shares be? a.l. What is the market value balance sheet for Zetatron before this transaction? Account Amount Cash $50 million (Round to the nearest integer.) Non-Cash Assets S 700 million (Round to the nearest integer.) Total Assets S 750 million (Round to the nearest integer.) Total Liabilities $0 million (Round to the nearest integer.) Total Equity S 750 million (Round to the nearest integer.) a.ii. What is the market value balance sheet Zetatron after the new securities are issued but before the share repurchase? Account Amount Cash $ million (Round to nearest integer.) Non-Cash Assets $ million (Round to nearest integer.) Total Assets $ million (Round to the nearest integer.) Total Liabilities $ million (Round to the nearest integer.) Total Equity $ million (Round to the nearest integer.)
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