Question
Here is Establishment Industries market-value balance sheet (Figures in millions): Net working capital $ 800 Debt $ 1,240 Long-term assets 2,800 Equity 2,360 Value of
Here is Establishment Industries market-value balance sheet (Figures in millions):
| Net working capital | $ | 800 | Debt | $ | 1,240 |
| Long-term assets | 2,800 | Equity | 2,360 | ||
| Value of firm | $ | 3,600 | $ | 3,600 | |
| The debt is yielding 6.2%, and the cost of equity is 14.8%. The tax rate is 34%. Investors expect this level of debt to be permanent. |
| a. | What is Establishments WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| WACC | % |
| b. | How would the market-value balance sheet change if Establishment retired all its debt? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.) |
| New Market-Value Balance Sheet (figures in millions) | |||
| Net working capital | $ | Debt | $ |
| Long-term assets | Equity | ||
| Value of firm | $ | Total | $ |
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 Geography Of Finance
Authors: Gordon L. Clark, Darius Wójcik
1st Edition
0199213364, 978-0199213368
