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BA620 is evaluating the following capital structure. Unlevered beta is 0.75, risk-free rate =1.5% and market risk premium=6%. Free cashflow is $500 million and EBIT

BA620 is evaluating the following capital structure. Unlevered beta is 0.75, risk-free rate =1.5% and market risk premium=6%. Free cashflow is $500 million and EBIT is $400 million. The company has 200 million shares. Tax rate is 25%. Which is the best capital structure for BA620 company? Fill in the necessary variables.

Percent of debt financing(wd)

0%

10%

20%

30%

40%

50%

Percent of equity financing(ws)

100%

90%

80%

70%

60%

50%

1.beta

2.Rs

Rd

5%

5.2%

6.0 %

6.40%

7%

8%

3.Rd(1-t)

4.W ACC

5.V op

6.Debt

7. Equity

8.Number of shares

9. Share price

10. Net Income

11. EPS

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