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Current Total assets $3,000,000,000 Tax rate 25% Operating income (EBIT) $6,000,000,000 Debt ratio 0% Interest expense $0 WACC 10% Net income $380,000,000 M/B ratio 1.20
| Current | Total assets | $3,000,000,000 | Tax rate | 25% |
| Operating income (EBIT) | $6,000,000,000 | Debt ratio | 0% | |
| Interest expense | $0 | WACC | 10% | |
| Net income | $380,000,000 | M/B ratio | 1.20 | |
| Share price | $32.00 | EPS | $3.80 | |
| Estimated growth rate | 0% | |||
| Dividend payout ratio | 100% |
| After going through extensive analysis, the company has decided to target 30% debt and 70% equity based on market values. |
| This strategy is expected to increase the cost of equity to 11%, assuming the pre-tax cost of debt 5.2%. |
| What is the target WACC? What is the target firm value? |
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Public Finance In Canada
Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon
5th Canadian Edition
1259030776, 978-1259030772
