Levered Recapitalization Under Trade-off Theory

By

I’m stuck on a Business question and need an explanation.

Question 3 – Levered Recapitalization under Trade-off Theory

You are the CFO of UBT Inc. and you are considering conducting a levered recapitalization. Specifically, you are planning on issuing a perpetual bond with a face value of $1,500 million and you will use all of the proceeds from this bond issuance to pay your existing shareholders a one-time dividend. You anticipate that the cost of debt associated with this transaction will be 4.1%.

You believe that increasing UBT’s leverage will benefit investors in two ways: First, the firm will be able toreap valuable tax shields. Second, you expect that managers will be more incentivized to reduce costs and close down unprofitable projects as a result of this transaction. Specifically, you anticipate that this expected agency benefit has a present value of $50 million. You do not anticipate any agency or distress costs as a result of this transaction.

The table below shows additional information on UBT Inc. before the new bond is issued. You may assumethat the company has no excess cash, and that UBT’s investors do not pay personal taxes on interest,dividends, or capital gains.

A) What is the enterprise value of UBT Inc. before the proposed transaction (i.e. before the new bond is issued)? B) What is the enterprise value of UBT Inc. after the dividend has been paid? C) What is the share price after the dividend has been paid?
Document attached.

Only need question 3 answeredClass 4: Quiz; A Civil Action: nursing homework help
I’m trying to learn for my Law class and I’m stuck. Can you help?

We will take the quiz at the beginning of class this evening and then watch the movie A Civil Action. Attached is the in-class assignment for the movie.A Civil Action Assignment.docxOne paragraph- Behavioral Finance
I’m working on a Business question and need guidance to help me study.

Behavior Finance- Select one of the three:

1. Attention Anomalies

2. Mental Accounting

3. Framing

I am looking for media examples related to the topic. These may NOT necessarily relate to finance, but to other areas of human life as well. I still want to see a brief description of each of these events addressing the following questionsa) what happened?b) who’s responsible?c) how it can be fixed (if it can)? and what are the consequences?

Please select one, provide an example, and focus on those three points.

This is an example to help you understand what I am looking for.

Here is an example about Anchoring behavior:

During Thanksgiving while friends and family are enjoying their turkey and stuffing, electronic retail stores, such as Best Buy, are preparing their staff for “Black Friday”. Black friday is notorious for causing arguments and physical altercations during hours of operation. But how do these stores advertise their deals that seem to make everyone go crazy? It’s often done through ads on social media and newspapers. Anchoring can be seen in the buying patterns of consumers. When we see an item, like on black friday, that’s reduced from the original price we often think that it is a good deal and pull the trigger rather than weighing all options and making a smart decision. A great example of this can actually be given by myself. A few years ago, I made the decision to buy “Beats By Dre” headphones during black friday. I thought I had a great deal because Best Buy advertised it as such. Later I realized that the headphones I purchased were not a deal at all and, instead, I actually paid more than some other stores. The main people responsible for anchoring tendencies are ourselves. We need to take information and process it slower rather than faster. This could help us save money in the short and long term. Businesses can also be to blame by making it hard to resist these deals however, they are a business and their main goal is to make money so I personally do not place much blame on them. The consequences to anchoring are mainly a loss of money and a feeling of stupidity.

How to create Testimonial Carousel using Bootstrap5

Clients' Reviews about Our Services