Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

The management of Mitchell labs decided to go private in 2002 by buying in all 3 million of its outstanding shares at 19.50 per share. By 2006 management had restructured the company by selling off the petroleum research division for 13 million, the fiber technology division for 9.5 million, and the synthetic products division for 21 million. Because these divisions had only been marginally profitable, Mitchell labs is a stronger company after the restructuring. Mitchell is now able to concentrate exclusively on contract research and will generate earnings per share of 1.25 this year. Investment bankers have contacted the firm and indicated that if it reentered the public market, the 3 million shares it purchased to go private could now be reissued to the public at a P/E ratio of 16 times earnings per share.

A. what was the initial cost to Mitchell labs to go private?

B. What was the total value to the company from (1) of the proceeds of one of the divisions that were sold as well as (2) of the current value of the 3 million shares(based on current earnings and an anticipated P/E of 16)?

C. What is the percentage return to the management of Mitchell labs from the restructuring? Use answers from parts A and B to determine this value.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M926609

Have any Question? 


Related Questions in Basic Finance

The following excerpts are taken from dividend policy

The following excerpts are taken from "Dividend Policy Determinants: An Investigation of the Influences of Stakeholder Theory" by Mark E. Holder, Frederick W. Langrehr, and J. Lawrence Hexter, published in the Autumn 199 ...

1 what is the primary logic behind potential separation of

1. What is the primary logic behind potential separation of marketing and logistics channel structure? 2. How does the risk related to inventory compare among manufacturers, wholesalers, and retailers? 3. Why wouldn't a ...

Assume that the heights of men are normally distributed

Assume that the heights of men are normally distributed with a mean of 67.3 inches and a standard deviation of 3.5 inches. If 100 men are randomly selected, find the probability that they have a mean height greater than ...

1 what is a leveraged buyout what is mezzanine financing2

1. What is a leveraged buyout? What is mezzanine financing? 2. What is a tax-free merger? 3. Explain the difference between the economic and financial definitions of business failure. 4. Explain the differences among the ...

How is the dupont system useful in analyzing a firms roa

How is the DuPont system useful in analyzing a firm's ROA and ROE? What information can be inferred from the decomposition of ROE into contributing ratios? What is the mathematical relationship between each of the indivi ...

A company will purchase a new machine with a cost of 750000

A company will purchase a new machine with a cost of $750,000. The machine requires aninitial investment in net working capital of $25,000. Net working capital will remain at this levelduring the life of the machine and ...

Suppose that you observe a european call option that is

Suppose that you observe a European call option that is priced at less than the value Max[0, S0 - X(1 + r)-T ]. What type of transaction should you execute to achieve the maximum benefit? Demonstrate that your strategy i ...

Explain why end users who conduct their risk management

Explain why end users, who conduct their risk management operations in the treasury department, should not require the treasury department to be a profit center ? Distinguish the typical objectives of a dealer engaging i ...

1 the study of annual reports reviewed in this chapter

1. The study of annual reports reviewed in this chapter showed that earnings per share was disclosed in every annual report. Why? 2. The study of annual reports reviewed in this chapter indicated that wide differences of ...

1 develop a topic of interest to you and prepare both a

1. Develop a topic of interest to you, and prepare both a structured and an unstructured interview. Collect data from your classmates, and develop a method for coding the findings. 2. Create a sampling frame, and collect ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen