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Business, 20.04.2020 23:54 ZahauQ

Assume that WyoOne Corp. recently moved to its optimal capital structure by issuing $4,000mn additional debt and this move resulted in an increase of $2,500mn in firm value. There are 800mn shares outstanding and the current stock price is $17.5. WyoOne corp. intends to buy back shares with the proceeds from debt. Use this information to answer the following questions:

a.) At what buy-back price would shareholders be indifferent between selling shares back and holding on to them?
b.) If WyoOne Corp. announces a share buyback program at $19.5, are you better of selling the shares back or holding on to them? What should be the price of WyoOne Corp. shares after the buyback?
c.) If WyoOne Corp. announces a share buyback program at $22.5, are you better of selling the shares back or holding on to them? What should be the price of WyoOne Corp. shares after the buyback

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Assume that WyoOne Corp. recently moved to its optimal capital structure by issuing $4,000mn additio...
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