EBIT		$ 600,000
g		0.0%
r		10.0%
Shares o/s		200,000
Taxes		25.0%
NI		$ 450,000
Before Recapitalization:
Value of Ops		$ 4,500,000
Value per share		$ 22.50
EPS		$ 2.25
		1:13 sthn 1h dialexh
Recap:
New debt	30.0%	$ -
Rate on new debt		7.00%
Shares repurchased		-
New shares o/s
New interest exp		$ -
New NI:
EBIT		$ 600,000
Interest exp		$ -
EBT		$ 600,000
Taxes		$ (150,000)
New NI		$ 450,000
New EPS		#DIV/0!

Solving for: New NI New EPS Assume no changes to Value of Ops and Value per share .Calculate amount of new debt .Calculate number of shares to be repurchased .Calculate new number of shares outstanding .Calculate new interest expense Solve for: .New NI .New EPS Executive Summary: .Why would a company do a recap? How does it benefit common shareholders? .One-half page max. 1:17 sthn dialexh