Considering the information in the table below, indicate which amount borrowed you believe to be the optimal
Fantastic news! We've Found the answer you've been seeking!
Question:
Considering the information in the table below, indicate which amount borrowed you believe to be the optimal level of debt and explain completely why.
Amount Borrowed | Value of Equity | Value of the Firm | Stock Price | WACC | EPS |
0 | 18,460 | 18,460 | 18.46 | 13.0% | 2.40 |
$ 2 Million | 17,320 | 19,320 | 19.32 | 12.42 | 2.55 |
$ 4 Million | 15,830 | 19,830 | 19.83 | 12.10 | 2.70 |
$ 6 Million | 14,020 | 20,020 | 20.03 | 11.99 | 2.54 |
$ 8 Million | 16,570 | 24,570 | 24.57 | 11.50 | 3.04 |
$10 Million | 12,000 | 22,000 | 22.00 | 12.00 | 3.20 |
NOTE: Value of the Firm is equal to the Amount Borrowed plus the Value of Equity
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
Posted Date: