The document discusses the capital structure, valuation, and cost of capital of The Wm. Wrigley Jr. Company. It asks questions about an active-investor strategy by Blanka Dobrynin and the effects of Wrigley issuing $3 billion in new debt to either pay a dividend or repurchase shares. This would impact the company's outstanding shares, book value of equity, stock price, earnings per share, debt ratios, financial flexibility, and family voting control. It also asks about Wrigley's current weighted-average cost of capital and how that would be affected by the recapitalization plan. Finally, it asks if Dobrynin should try to convince directors to undertake the recapitalization.
The document discusses the capital structure, valuation, and cost of capital of The Wm. Wrigley Jr. Company. It asks questions about an active-investor strategy by Blanka Dobrynin and the effects of Wrigley issuing $3 billion in new debt to either pay a dividend or repurchase shares. This would impact the company's outstanding shares, book value of equity, stock price, earnings per share, debt ratios, financial flexibility, and family voting control. It also asks about Wrigley's current weighted-average cost of capital and how that would be affected by the recapitalization plan. Finally, it asks if Dobrynin should try to convince directors to undertake the recapitalization.
The document discusses the capital structure, valuation, and cost of capital of The Wm. Wrigley Jr. Company. It asks questions about an active-investor strategy by Blanka Dobrynin and the effects of Wrigley issuing $3 billion in new debt to either pay a dividend or repurchase shares. This would impact the company's outstanding shares, book value of equity, stock price, earnings per share, debt ratios, financial flexibility, and family voting control. It also asks about Wrigley's current weighted-average cost of capital and how that would be affected by the recapitalization plan. Finally, it asks if Dobrynin should try to convince directors to undertake the recapitalization.
COMPANY: CAPITAL STRUCTURE, VALUATION, AND COST OF CAPITAL
Questions 1. In the abstract, what is Blanka Dobrynin hoping to accomplish through her active-investor strategy? 2. 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. Wrigleys outstanding shares? b. Wrigleys book value of equity? c. The price per share of Wrigley stock? d. Earnings per share? e. Debt interest coverage ratios and financial flexibility? f. Voting control by the Wrigley family? 3. What is Wrigleys current (prerecapitalization) weighted-average cost of capital (WACC)? 4. What would you expect to happen to Wrigleys WACC if it issued $3 billion in debt and used the proceeds to pay a dividend or to repurchase shares? 5. Should Blanka Dobrynin try to convince Wrigleys directors to undertake the recapitalization?