Multi-Part 15-2:Volunteer Fabricators, Inc. (VF) currently has zero de
QUESTION
Multi-Part 15-2:Volunteer Fabricators, Inc. (VF) currently has zero debt. It is a zero growth company, 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. I
answer: $53.33 details The price per share does not change in the repurchase. As a check, consider the following data: Value of operations = EBIT(1 T)/WACC $533,333 value of T-bills 0 Total value
333 repurchase -213,333 Value of equity $320,000 New shares = old Debt/Price = 6,000 Stock price = Equity divided by # shares $ 53.33
ANSWER:
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