Qlink ltd is involved in manufacturing of fast -moving consumer goods.The firm is currently an all -equity firm with 30 million shares outstanding and stock price of Kshs.10 per share.The firm plans to announce that it will borrow Ksshs.400 million and use the funds to repurchase shares. The firm will pay interest only on this debt and has no plans to change its debt holding in future. The prevailing corporate tax rate is 30%. (i)What is the market value of the firm's existing existing assets before the announcement? (ii)What is the market value of the firm's assets(including tax shields) just after the debt is issued but before the shares are repurchased? (iii)What is the firm's share price just before the share repurchase?However many shares will Qlink Ltd repurchased? (iv) What are Qlink Ltd's market value balance sheet and share price after share repurchase?
Qlink ltd is involved in manufacturing of fast -moving consumer goods.The firm is currently an all -equity firm with 30 million shares outstanding and stock price of Kshs.10 per share.The firm plans to announce that it will borrow Ksshs.400 million and use the funds to repurchase shares. The firm will pay interest only on this debt and has no plans to change its debt holding in future. The prevailing corporate tax rate is 30%.
(i)What is the market value of the firm's existing existing assets before the announcement?
(ii)What is the market value of the firm's assets(including tax shields) just after the debt is issued but before the shares are repurchased?
(iii)What is the firm's share price just before the share repurchase?However many shares will Qlink Ltd repurchased?
(iv) What are Qlink Ltd's market value balance sheet and share price after share repurchase?
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