What will be the effects of issuing $3 billion of new debt and using the proceeds to repurchase shares on: Wrigley’s outstanding shares? on the price per share of Wrigley’s stock?

For this project, please use Excel to do your calculations and analysis and then type a report in MS Word. Your report should clearly and thoroughly answer the eight questions below. The report should be typed double-spaced using a Times New Roman Font, size 12. Please limit your report to no more than 10 pages. Submit your report and Excel file on Blackboard, as well as provide me a hard copy of your report in class. All of this needs to be completed by the listed due date on the syllabus.

1) What will be the effects of issuing $3 billion of new debt and using the proceeds to repurchase shares on: Wrigley’s outstanding shares? on the price per share of Wrigley’s stock?

2) What will be the effects of issuing $3 billion of new debt and using the proceeds to pay a dividend on: Wrigley’s outstanding shares? on the price per share of Wrigley’s stock?

3) What is Wrigley’s current (pre-recapitalization) weighted average cost of capital (WACC)?

4) What would you expect to happen to Wrigley’s WACC if it issued $3 billion in debt and used the proceeds to pay a dividend or to repurchase shares?

5) What will be Wrigley’s current EPS (pre-recapitalization) given the following operating incomes? Assume the following numbers are in millions.

Operating income (EBIT)

-$86

$214

$514

$814

$1,114

$1,414

$1,714

6) What would you expect to happen to Wrigley’s EPS if it issued $3 billion in debt and: used the proceeds to pay a dividend? used the proceeds to repurchase shares? Calculate the potential EPS’s given the following incomes. Assume the numbers are in millions.

Operating income (EBIT)

-$86

$214

$514

$814

$1,114

$1,414

$1,714

Finally, what can you conclude regarding the re-capitalization strategies? Do you recommend Wrigley to pay a dividend or repurchase shares. Used data or graphs to support your recommendation.

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