Newkirk, Inc. is an unlevered firm with expected annual EBIT of $21 million in perpetuity. The...

 

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Newkirk, Inc. is an unlevered firm with expected annual EBIT of $21 million in perpetuity. The current required return on the firm's equity is 15 percent, and the firm distributes all of its earnings as dividends at the end of each year. The company has 2 million shares of common stock outstanding and is subject to a corporate tax rate of 35 percent. The firm is planning a recapitalization under which it will issue $30 million of perpetual 9 percent debt and use the proceeds to buy back shares. The plan will be announced on June 18, 2021 and will be carried out on June 30, 2021. What is the share price and the number of shares of stock outstanding on June 19, 2021? Newkirk, Inc. is an unlevered firm with expected annual EBIT of $21 million in perpetuity. The current required return on the firm's equity is 15 percent, and the firm distributes all of its earnings as dividends at the end of each year. The company has 2 million shares of common stock outstanding and is subject to a corporate tax rate of 35 percent. The firm is planning a recapitalization under which it will issue $30 million of perpetual 9 percent debt and use the proceeds to buy back shares. The plan will be announced on June 18, 2021 and will be carried out on June 30, 2021. What is the share price and the number of shares of stock outstanding on June 19, 2021?

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