Case Study: "The WM. Wrigley Jr. Company: Capital Structure, Valuation and Cost of Capital"

Things to consider for the Wrigley Case:

What is the value of the firm?

What is the value of the firm after the proposed debt issue?

Is the coupon rate for the proposed issue reasonable?

Support your response by computing financial ratios for Wrigley and compare them to those presented for proxy firms.

Is the size of the debt issue reasonable?

What are the benefits and costs of issuing debt in this case?

If the company issues the debt, what will be the impact on EPS, WACC and Share price?

Consider these effects when the proceeds of the issue are paid out as dividends and when they are used to repurchase shares.

The Wrigley family owns a large portion of stock in the company. How will the debt issue affect them?

Would they prefer to have the proceeds used to repurchase shares or pay a cash dividend?

Conduct a sensitivity analysis to show the sensitivity of EPS to changes in EBIT when there is and is not debt.

Attachment:- WM. Wrigley Jr. Companys Spreadsheet.xls