Here are the questions that must be answered. I prefer the answers to be short and to the point, but MUST HAVE ALL FORMULAS AND CALCULATIONS.
1) What will be the effects of issuing $3 billion of new debt and using the proceeds either to pay a dividend or to repurchase shares on:
a. Wrigley’s outstanding shares?
b. Wrigley’s Book Value of equity?
c. The price per share of Wrigley stock?
d. Earnings per share?
e. Debt interest coverage ratios and financial flexibility?
2) What is Wrigley’s current (precapitalization) WACC?
3) 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?
