17. Goodell Media is a publicly traded firm with 80 million shares outstanding, trading at $ 10/share, and $ 200 million in debt outstanding. Goodell is considering borrowing $440 million and buying back shares at $11/share; the cost of capital will drop from 8.25% to 8% as a consequence. Assuming no growth in perpetuity, estimate the value per share for the remaining shares, after the buyback.
17. Goodell Media is a publicly traded firm with 80 million shares outstanding, trading at $ 10/share, and $ 200 million in debt outstanding. Goodell is considering borrowing $440 million and buying back shares at $11/share; the cost of capital will drop from 8.25% to 8% as a consequence. Assuming no growth in perpetuity, estimate the value per share for the remaining shares, after the buyback.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 9MC
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