Question: Foundations, Inc. (VF) Van Mannen Foundations, Inc. (VF) is a zero-growth company that curently has zero debt, and it has the data shown below. Now
Foundations, Inc. (VF) Van Mannen Foundations, Inc. (VF) is a zero-growth company that curently has zero debt, and it has the data shown below. Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. $80,000New Debt Value EBIT Growth- Orig cost of equity, r New cost of equity r- 0%New Equity/Value- 10.0%No, of shares- 11 .0%Price per share- 209 80% 10,000 $48.00
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