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Nichols Corporation's value of operations is equal to $500 million after a recapitalization (the firm had no debt before the recap). It raised $150 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, wd = 30%. What is S (the value of equity after the recap)? Enter your answer in millions of dollars.

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Kolawole845

Answer:

Value of equity $350 million

Explanation:

The value of a levered firm is the sum of the value of equity and the value of debt securities

The total value = Value of equity + Value of debt

Value of debt= 30% × 500

                       = $150 million

Value of equity = Value of company - Value of debt

 = $500 million - $150 million

= $350 million

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