Question
Zetatron is an all-equity firm with 290 million shares outstanding, which are currently trading for $21.76 per share. A month ago, Zetatron announced it will
Zetatron is an all-equity firm with 290 million shares outstanding, which are currently trading for $21.76 per share. A month ago, Zetatron announced it will change its capital structure by borrowing $857 million in short-term debt, borrowing $1023 million in long-term debt, and issuing $916 million of preferred stock. The $2796 million raised by these issues, plus another $84 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 Before this transaction?
Account Amount
Cash ________million (Round to nearest integer)
Non-Cash Assets ________million (Round to the 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)
B. What is the market value of Zetaron 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 the 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)
C. What is the market value of Zetatron After the share repurchase?
Account Amount
Cash ________million (Round to nearest integer)
Non-Cash Assets ________million (Round to the 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)
D. At the conclusion of this transaction, how many shares outstanding will Zetatron have, and what will the value of those shares be?
Account Amount
Cash ________million (Round to nearest integer)
Non-Cash Assets ________million (Round to the 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)
E. At the conclusion of this transaction, how many shares outstanding will Zetatron have, and what will the value of those shares be?
_______Outstanding Shares
The price per share will be ________ (Round to 2 decimal places)
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Bakers Health Care Finance Basic Tools For Nonfinancial Managers
Authors: Thomas K. Ross
6th Edition
1284233162, 978-1284233162
