Under Armour, Inc. (NYSE:UA) develops, markets, and distributes branded performa

Question

Under Armour, Inc. (NYSE:UA) develops, markets, and distributes branded performance apparel,footwear, and accessories. The rm has $593.2 in cash, $284.8 million in debt, and 215.5 million sharesoutstanding trading at $80.25. Under Armour is considering a leveraged recapitalization in which itwould issue $2,000 million in debt and use the proceeds to repurchase shares. Under Armour's cost ofdebt is 1.20%, its cost of equity is 5.08%. If the rm pays 39.20% corporate income taxes and intendson maintaining the new debt in perpetuity, how many shares will the rm repurchase if it decides toproceed with the recapitalization? A. 10.94 millionB. 23.84 millionC. 24.92 millionD. 32.31 million.

Explanation / Answer

C) 24.92 million shares can be recapitalised with the proceeds of $ 2000 million debt

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