What would you expect to happen to Wrigley’s WACC if it issued $3 billion in debt

What would you expect to happen to Wrigley’s WACC if it issued $3 billion in debt

Case 10: “The Wm. Wrigley, Jr. Company: Capital Structure, Valuation, and Cost of Capital”

              Supplemental Spreadsheet Available

Advance Assignment:

1. In the abstract, what is BlankaDobrynin hoping to accomplish through her active-investor strategy?
2. What will be the effects of issuing $3 billion of new debt and using the proceeds either to dividend or to repurchase shares on:
3. Wrigley’s outstanding shares?
4. Wrigley’s book value of equity?
5. The price per share of Wrigley stock?
6. Earnings per share?
7. Debt interest coverage ratios and financial flexibility?
8. Voting control by the Wrigley family?
9. What is Wrigley’s current (pre-recapitalization) weighted-average cost of capital (WACC)?
10. What would you expect to happen to Wrigley’s WACC if it issued $3 billion in debt and used the proceeds to pay a dividend or to repurchase shares?
11. Should BlankaDobrynin try to convince Wrigley’s directors to undertake the recapitalization?

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