Limitas Inc. is a publicly traded chemical company with 200 million shares trading at $22 a share and $ 1.1 billion (market value) in outstanding debt; the market interest rate on the debt is 7.2%. The firms received a payment of $1.1 billion dollars in settlement of a patent suit from a competitor and decides to retire (pay down) all of its debt. You have the following information about the company: current equity (levered) beta is 1.65, risk free rate is 2.0%, market premium is 5.0%, tax rate is 38%; last year's free cash flow (to firm) was $210 million, which is expected to grow at a constant rate.

1. Estimate the new value for the firm if it goes through with this transaction (10 points)
2. What is the change in the value of a share (10 points)