Question

eBook Value of Equity after Recapitalization Nichols Corporations value of operations is equal to $500 million after a recap
eBook Stock Price after Recapitalization Lee Manufacturings value of operations is equal to $900 million after a recapitaliz
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Answer #1

Weight of debt = 30%
Weight of equity = 100% - 30% = 70%
Value of equity after recap = Value of firm - weight of equity
= $500 million * 70%
= $350 million.

Value of equity after recap = $350 million

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Answer #2

DATA

Value of Firm500 million

Debt40%

Equity60%
Solution:

Value of equity = total market value -   value of debt

Value of Equity =  [Debt / wD] - Value of Debt

Value of EQUITY = ( 200/ 0.4) - 200

value of Equity = 500 - 200

Value of Equity = 300




Value of equity after recap = Value of   firm * weight of equity

Value of equity after recap = 500 Million   * 60%

Value of Equity After Recap =  300


answered by: Saad Asif
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