ALL DONE IN EXCEL
Fiscal year ending: 12/31/2018
Assets: 16,173,000,000
Debt: 7,532,000,000
Shares: 322,884.000
Revenues: 9,061,000,000
EBIT: 475,000,000
Interest: 338,000,000
NetInc: 263,000,000
Stock Price: $39,98
Tax Paid: -126,000,000
Tax Rate: -91.97%
Task 1: Based on the above data, compute the following values:
Debt/Assets Ratio:
Debt/Equity ratio:
Earnings per share:
Interest rate on debt:
Value of interest Tax shield:
Task 2: Consider the following scenario:
the management team Is considering the possibility of increasing the firm's use of debt capital.
They propose to implement a leveraged repurchase, under which the firm would buy 10% of the outstanding shares, issuing long-term debt as needed to finance transaction.
Repurchase ratio: 10.00%
how many shares would be repurchased?
How much would the firm need to borrow to fund this purchase (ignore transaction costs and market price effects)
Based on the interest rate estimated in Task #1, how much (in dollars) would this add to the annual interest expense?
Under the proposal, calculate the following (assuming the proposed transaction has been completed):
Shares outstanding:
Debt:
Interest Expense:
Net income:
Earnings per share:
Debt/Assets ratio:
Debt' Equity ratio:
Value of interest Tax shield:
Breakeven EBIT:
How much would the proposed restructuring add to the value of the firm?
Do you think the proposed restructuring should proceed? Why or why not?
