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Team 14
Constantine Brocoum
Courtney Delia
Stephanie Doherty
David Dubois
Radu Oprea
November 19th, 2009
Objectives 1
Management Summary 2
Item 1 2 Sub 1.1 2 Sub 1.2 2 Conclusion 2
Item 2 2 Sub 2.1 2 Conclusion 2
Item 3 2 Sub 3.1 2 Sub 3.2 2 Conclusion 2
Item 4 2
Item 5 2
Appendices 2

This report seeks to answer the following five questions about William Wrigley Jr.: 1. In the abstract, what is Blanka Dobrynin 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 pay a dividend or to repurchase shares on: a. Wrigley’s outstanding
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The market value of a levered firm versus an unlevered firm is as follows: I AM GOING TO PASTE IN AN EXCEL FILE PAGE 500 IN THE TEXT TALKS ABOUT THE ADVANTAGES.

As estimated in the case, a 40% tax rate can generate some significant savings if avoided.
Sub 1.1
Sub 1.2
$3 Billion in new debt
a. Issuing 3 billion dollars of new debt to buy back shares will reduce the number of outstanding shares, placing those shares in the company treasury as treasury stock. Paying a dividend with this borrowed money will not affect the number of shares outstanding.
b. The net asset value or book value of a company is calculated by total assets minus intangible assets (patents, goodwill) and liabilities. So as the company issues more debt the book is not changed since both sides of the balance sheet are increased by $3 Billion. The book value of the company should not be affected by a dividend payout.
c. The price of a share will decrease by the amount of the dividend paid per share. Repurchasing shares of the company stock will not have an effect on the share price directly. Some investors see share repurchase as a “bullish sign” for the company so the shares may appreciate on that basis.
d. Earnings per share (EPS) = Earnings After Taxes(EAT)/Outstanding Shares. If the number of outstanding shares is reduced by a buyback of shares then the EPS will increase if the EAT remains unchanged. However the EAT is reduced since there is interest expense. If the dividend
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