Management of Corporate Capital Structure. Apply the M&M theory to complete the worksheet for the recapitalization alternative. Again use excel spreadsheet and correct cell formula. Based on your calculation result, do you think the recapitalization alternative will deter the hostile tender offer at $61 a share? As a way of illustrating the usefulness of the M&M theory and consolidating you grasp of mechanics consider the following case and complete the worksheet. On March 3, 1988 Beazer PLC (a British construction company) and Shearson Lenman Hutton Inc. (an investment banking firm) commenced a hostile tender offer to purchase all the outstanding stock of Koppers Company, Inc. a producer of construction materials, chemicals and building products. Originally , the raiders offered $45 a share; subsequently the offer was raised to $56 and then finally to $61 a share. The Koppers board asserted that the offers were inadequate and its management was reviewing the possibility of a major recapitalization. To tes the valuation effects of the reapitalizaion alternative, assume that Koppers could borrow a maximum of $1,738,095,000 at a pretax cost of debt of 10.5% and that the aggregate amount of debt will remain constant in perpetuity. Thus, Koppers will take on additional debt of $1,565,686,000 (that is $1,738,095,000 minus $172,409,000). Also, assume that the proceeds would be paid as an extrodinary dividen dividend to shareholders.
Koppers Company, Inc. (values in thousand)
Before Recapitalization After Recapitalization

Book-Value Balance Sheets
Net working capital $ 212,453
Fixed assets 601,446
Total assets 813,899
Long-term debt 172,409
Deferred taxes, etc. 195,616
Preferred stock 15,000
Common equity 430,874
Total capital 813,899
Market-Value Balance Sheets
Net working capital $212,453
Fixed assets 1,618,081
PV debt tax shield 58,619
Total assets 1,889,153
Long-term debt 172,409
Deferred taxes, etc.
Preferred stock 15,000
Common equity 1,701,744
Total capital $1,889,153
Number of shares 28,128
Price per share S 60.50
Value to Public Shareholders
Cash received ---
Value of shares $1.701.744
Total $1,701,744
Total per share S 60.50