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Business, 04.12.2019 01:31 freemankellie

Schwartz industry is an industrial company with 100 million shares outstanding and a market capitalization (equity value) of $4 billion. it has $2 billion of debt outstanding. management have decided to delever the firm by issuing new equity to repay all outstanding debt.

a) how many new shares must the firm issue?

b1) suppose you are a shareholder holding 100 shares, and you disagree with this decision. assuming a perfect capital market, how much should you borrow to hold the same amount of levered equity?

b2) how many new shares should you buy?

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