Select two major public companies in the same industry based in the United States that are listed on one of the major stock exchanges. Each student should select a different set of companies.

What are the current capital structures of the companies? Calculate the Weighted Average Cost of Capital $($WACC$)$ of each company? Calculate the Free Cash Flow $($FCF$)$ of each company? What is the value of each company according to the MM Model with corporate taxes of $21\%?$

The companies are planning to use new debt to buy back $25\%$ of their common stocks. What are the stock prices of each company after the recapitalizations? How many common shares will each company have after the recapitalizations? Is this recapitalization a good idea? Why or why not?

Now assume the larger company is purchasing the smaller company. This will cause its Free Cash Flow $($FCF$)$ to increase by $10\%$ in the first two years then by $2\%$ from here on$.$ Using the Adjusted Present Value $($APV$)$ Model what is the maximum price per share should the larger company offer? Is this purchase a good idea? Why or why not?