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I need all answers to each part of the problem please Pettit Printing Company has a total market value of $100 million, consisting of 1
I need all answers to each part of the problem please
Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $11.34 million, and its tax rate is 40%. Pettit can change its capital structure either by increasing its debt to 65% (based on market values) or decreasing it to 35%. If it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 14% coupon. If it decides to decrease its leverage, it will call in its old bonds and replace them with new 996 coupon bonds. The company will sell or repurchase stock at the new equilibrium price to complete the capital structure change The firm pays out all earnings as dividends; hence, its stock is a zero growth stock. Its current cost of equity, rs, is 14%. If it increases leverage, rs will be 16%. If it decreases leverage, rs will be 13% Present situation (50% debt) What is the firm's WACC? Round your answer to three decimal places What is the total corporate value? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to three decimal places. million 65% debt: What is the firm's WACC? Round your answer to two decimal places What is the total corporate value? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to three decimal places. million 35% debt: What is the firm's WACC? Round your answer to two decimal places What is the total corporate value? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to three decimal places. millionStep by Step Solution
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