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Amtron Incorporated has no debt in its current fin...

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Amtron Incorporated has no debt in its current financial structure. The firm expects perpetual annual before-tax cash flows of $30 million and has a marginal corporate tax rate of 30 percent. There are currently 1 million shares of stock outstanding with a required return on equity of 18 percent. Amtron is currently planning a recapitalization under which it will issue $50 million of perpetual debt having an interest rate of 10 percent. The proceeds of the debt issue will be used to repurchase stock. Determine, (a) the post-recapitalization share price, (b) the post-recapitalization earnings per share, (c) the required return on equity, (d) the weighted average cost of capital, (e) the remaining number of shares outstanding following the recapitalization,use this document as a reference

 

Paper#5192 | Written in 18-Jul-2015

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