Lee Manufacturing’s value of operations is equal to $900 million after a recapit

Question

Lee Manufacturing’s value of operations is equal to $900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised $300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, Wd (percent financed with debt) 1/3. The firm had 30 million shares before the recap.

What is P (the stock price after the recap)?

Calculations/answers should be in Excel and have Excel formulas clearly shown; no handwritten/scanned answers

Explanation / Answer

The stock price after the recap P = 900/30 = $30

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