Question
Zetatron is an all-equity firm with 260 million shares outstanding, which are currently trading for 24.18 per share. A month ago, Zetatron announced it with
Zetatron is an all-equity firm with 260 million shares outstanding, which are currently trading for 24.18 per share. A month ago, Zetatron announced it with a change its capital structure by borrowing 943 million in short term debt, borrowing 1,036 million in long-term debt, and issuing 813 million of preferred stock. The 2,792 million raised by these issues, plus another 73 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 market. A. What is the market value balance sheet for Zetatron. Before transaction. After the new securities are issued but before the share repurchase. After the share purchase? B. At the conclusion of this transaction how many shared outstanding will Zetatron have, and what will the value of those shares be?
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