Assume that as of 15 Jan 2020, Company A had no debt or cash. The firm?s managers
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Assume that as of 15 Jan 2020, Company A had no debt or cash. The firm?s managers consider recapitalising the firm by issuing zero-coupon debt with a face value of $30 billion due in Jul of 2022, and using the proceeds to repurchase shares. Assume that before issuing the debt, Company A had 545.45 million shares outstanding and a market capitalisation of $34.91 billion. Assume perfect capital markets.
Use the option data from 15 Jan, 2020 in the following figure to determine Company A's firm value after debt issuance:
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