Question: Schwartz Industry is an industrial company with 89.9 million shares outstanding and a market capitalization? (equity value) of $ 3.16 billion. It has $2.71 billion of debt outstanding. Management have decided to delever the firm by issuing new equity to repay all outstanding debt.
a. How many new shares must the firm issue?
b. Suppose you are a shareholder holding 100? shares, and you disagree with this decision.
Assuming a perfect capital market, describe what you can do to undo the effect of this decision.
You should (Sell or Buy) ___new shares and (Lend or Borrow) $ _____. ( round the number of shares to the nearest? integer, and round the dollar amount to the nearest dollar.)