Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Zetatron is an all-equity firm with 270 million shares outstanding, which are currently trading for $21.83 per share. A month ago, Zetatron announced it will
Zetatron is an all-equity firm with 270 million shares outstanding, which are currently trading for $21.83 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $941 million in short-term debt, borrowing $1,032 million in long-term debt, and issuing $620 million of preferred stock. The $2,593 million raised by these issues, plus another $72 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? Zetatron is an all-equity firm with 270 million shares outstanding, which are currently trading for $21.83 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $941 million in short-term debt, borrowing $1,032 million in long-term debt, and issuing $620 million of preferred stock. The $2,593 million raised by these issues, plus another $72 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started