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question 81

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Use the information for the question(s) below.
Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-Assume that in the event of default,20% of the value of MI's assets will be lost in bankruptcy costs.Suppose that at the start of the year,MI has no debt outstanding,but has 5.6 million shares of stock outstanding.If MI issues debt of $125 million due next year and uses the proceeds to repurchase shares,the share price following the announcement of the repurchase will be closest to:

Definitions:

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Organelles that are part of the protein synthesis machinery of both prokaryotic and eukaryotic cells; consist of a larger and smaller subunit, each composed of ribosomal RNA (rRNA) and ribosomal proteins.

Confocal Microscopy

A sophisticated imaging method that uses a laser to collect high-resolution images from successive depths within thick specimens.

Excite Fluorophores

The process of causing fluorophores (fluorescent molecules) to emit light upon absorption of light at a specific wavelength.

Laser

A device that emits light through a process of optical amplification based on the stimulated emission of electromagnetic radiation.