As part of a leverage buyout transaction, Biggers Manufacturing worth $1.25B with no debt was taken...

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As part of a leverage buyout transaction, Biggers Manufacturing worth $1.25B with no debt was taken private. The company borrowed $1.00B in perpetuity to finance the deal, using the proceeds to buy back stock as part of the going private transaction. If the company pays taxes at 20%, what is the value of the levered firm after the recapitalization, and what is the market value of the equity holders remaining position? Ignore risks of financial distress. As part of a leverage buyout transaction, Biggers Manufacturing worth $1.25B with no debt was taken private. The company borrowed $1.00B in perpetuity to finance the deal, using the proceeds to buy back stock as part of the going private transaction. If the company pays taxes at 20%, what is the value of the levered firm after the recapitalization, and what is the market value of the equity holders remaining position? Ignore risks of financial distress.

Answer rating: 100% (QA)

Unlevered value of firm 125 Billion Debt taken to buy back stock 1 Billion Tax rate 20 ... View the full answer