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 longterm debt, and issuing $100 million of...

a i A 50 cash 700 noncash L 750 equity ii A 350 cash 700 nonca ...

Zetatron is an all-equity firm with 100 million shares outstanding, which are currently trading for $7.50 per

Question:

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 by borrowing $100 million in short-term debt, borrowing $100 million in longterm 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 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?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...