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Given: bu 1 Wd = % of debt Rd = Cost of Debt T 40% 20% 8% Rs 12% =cost of equity 30% 8.50% Rf
Given: | |||||
bu | 1 | Wd = % of debt | Rd = Cost of Debt | ||
T | 40% | 20% | 8% | ||
Rs | 12% | =cost of equity | 30% | 8.50% | |
Rf | 6% | 40% | 10% | ||
RPM | 6% | =Rm-rf | |||
EBIT | 500,000 | ||||
Shares | 100,000 | ||||
Hint: | |||||
bL= bU [1 + (1 - T)(D/S)] | <--- Hamanda Equation (MM with Corporate Taxes) | ||||
rs= rRF + bL (RPM) | <---CAPM | ||||
WACC = wd (1-T) rd + we rs | |||||
Vop = FCF(1+g) / (WACC-g) | <---Application of Gordon Growth Model | ||||
D = Wd V | |||||
P = S + (D D0)/N0 | |||||
Objectives: | |||||
1. Find the debt level of an optimal capital structure that max. Value of the firm. | |||||
2. Find the Stock price based on the Optimal Capital Structure |
Need ASAP!!! I will thumbs up :) Please help.
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