Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Having trouble filling out the second half of this table. Any help would be greatly appreciated. Corporate tax rate 0.0% Interest rate 4.0% Market premium
Having trouble filling out the second half of this table. Any help would be greatly appreciated.
| Corporate tax rate | 0.0% | ||
| Interest rate | 4.0% | ||
| Market premium | 5% | ||
| **** Debt Capitalization **** | |||
| Debt = 0 | Debt = 500 | ||
| Income Statement | |||
| Revenue | 1500 | 1500 | |
| Operating expenses | 1375 | 1375 | |
| Operating profit | 125 | 125 | |
| Interest payments | 0 | 20 | |
| Taxes | 0 | 0 | |
| Net profit | 125 | 105 | |
| Dividends | 125 | 105 | |
| Shares outstanding | 62.5 | 62.5 | |
| Dividends per share | 2.00 | 1.68 | |
| Cash flows | |||
| Debt holders | 0 | 20 | |
| Equity holders | 125 | 105 | |
| Free cash flow | 125 | 125 | |
| Cost of Capital | |||
| Cost of debt | 4.00% | 4.00% | |
| Beta | 0.800 | ||
| Cost of equity | 8.00% | ||
| WACC | 8.00% | ||
| Value | |||
| Debt | 0.0 | ||
| Equity | 1562.5 | ||
| Total | 1562.5 | ||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Complete Direct Investing Handbook
Authors: Kirby Rosplock
1st Edition
1119094712, 978-1119094715
