SparkyCo currently has annual revenues of $1,000,000 per year with cash operating expenses of $500,000,...
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SparkyCo currently has annual revenues of $ per year with cash operating expenses of $ and depreciation expense of into the perpetual future. The cost of unlevered equity is and its tax rate is The firm currently has no debt. For our purposes, assume that the firm purchases no new fixed assets and the change in WC is zero. Assume the firm has shares outstanding.a Calculate the unlevered cash flow UCF per year for SparkyCo. b Calculate the current value of the firm as well as the price per share. c SparkyCo will now issue $ of perpetual debt at a interest rate and use the proceeds to repurchase shares of its stock. What will be the value of the firm after the debt issuance and share repurchase? d What price per share will it have to pay to repurchase shares and how many shares will be outstanding after that repurchase?
SparkyCo currently has annual revenues of $ per year with cash operating expenses of $ and depreciation expense of into the perpetual future. The cost of unlevered equity is and its tax rate is The firm currently has no debt. For our purposes, assume that the firm purchases no new fixed assets and the change in WC is zero. Assume the firm has shares outstanding.a Calculate the unlevered cash flow UCF per year for SparkyCo. b Calculate the current value of the firm as well as the price per share. c SparkyCo will now issue $ of perpetual debt at a interest rate and use the proceeds to repurchase shares of its stock. What will be the value of the firm after the debt issuance and share repurchase? d What price per share will it have to pay to repurchase shares and how many shares will be outstanding after that repurchase?
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