At what buy-back price would shareholders be indifferent


Assume that WyoOne Corp. recently moved to its optimal capital structure by issuing $5,000mn additional debt and this move resulted in an increase of $1,500mn in firm value. There are 800mn shares outstanding and the current stock price is $19.5. WyoOne corp. intends to buy back shares with the proceeds from debt. Use this information to answer the following questions: a.) At what buy-back price would shareholders be indifferent between selling shares back and holding on to them? b.) If WyoOne Corp. announces a share buyback program at $20.25, are you better of selling the shares back or holding on to them? What should be the price of WyoOne Corp. shares after the buyback?

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Financial Management: At what buy-back price would shareholders be indifferent
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