Question 8 (Payout Policy) Finnish Match Inc. is considering a new financial policy. Specifically, Finnish Match...
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Question 8 (Payout Policy) Finnish Match Inc. is considering a new financial policy. Specifically, Finnish Match will issue a perpetual bond with a face value of $2,000 million to conduct a share repurchase. The cost of debt associated with the perpetual bond is 5%. Additional financial information for the firm before the new financial policy is implemented can be found in the table below. The company has no excess cash and corporate taxes are the only market imperfection. Assume that shareholders do not expect the new financial policy. Financial Data for Finnish Match before Transaction Share Price (in $) $ # Shares outstanding (in millions) Market Value of Debt Outstanding (in $ millions) $2,500.00 Tax Rate 35% 95.00 250.00 Part A What is the enterprise value of the firm after the new financial policy is implemented? Show your work for full credit. Part B At what price will the firm repurchase the shares? Show your work for full credit. Question 8 (Payout Policy) Finnish Match Inc. is considering a new financial policy. Specifically, Finnish Match will issue a perpetual bond with a face value of $2,000 million to conduct a share repurchase. The cost of debt associated with the perpetual bond is 5%. Additional financial information for the firm before the new financial policy is implemented can be found in the table below. The company has no excess cash and corporate taxes are the only market imperfection. Assume that shareholders do not expect the new financial policy. Financial Data for Finnish Match before Transaction Share Price (in $) $ # Shares outstanding (in millions) Market Value of Debt Outstanding (in $ millions) $2,500.00 Tax Rate 35% 95.00 250.00 Part A What is the enterprise value of the firm after the new financial policy is implemented? Show your work for full credit. Part B At what price will the firm repurchase the shares? Show your work for full credit.
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Answer rating: 100% (QA)
Part A Enterprise Value After New Policy Step 1 Calculate the value of the new debt Face value of perpetual bond 2000 million Step 2 Calculate the ann... View the full answer
Related Book For
Essentials Of Business Statistics
ISBN: 9780078020537
5th Edition
Authors: Bruce Bowerman, Richard Connell, Emily Murphree, Burdeane Or
Posted Date:
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