15-5

Lee manufacturing’s value of operation is equal to $900 million after a recapitalization ( the firm had
no debt before recap ). It raised $300 million in new debt and used this to buy back stock. Nichols
had no short term investment before or after the recap. After the recap, wd = 1/3 the firm had 30
million share before the recap. What is P ( the stock price after the recap)?

Wd setelah recap = $300/$ 900

= 1/3

Vop = $900

S = (1-Wd)( Vop)

= (1-1/3)*$900

= $600

P ( stock price after the recap ) = price / share

= ( S+ New Debt) / Share number available

= (600 M + 300M )/ 30 M

= 30 M

15-6

Due Trucking raised $ 150 million in new debt and used this to buy back stock. After the recap, Dye’s
stock price is $7.5. if Dye had 60 million share of stock before the recap. How many share does it
have after the recap?
(D new−D old)
npost = nprior −
P

n post = 60 M – (150 M- 0) / 7.5

n post = 60 M – 20M

= 40 M