Integrative Optimal capital structure The board of directors of Morales Publishing, Inc, has commissioned a capital structure study. The company has total assets of $39,800,000. It has earnings before interest and taxes of 57,940,000 and is taxed at a rate of 23%. a. Create a spreadsheet showing values of debt and equity as well as the total number of shares, assuming a book value of $25 per share b. Given the before-tax cost of debt at yarious levels of indebtedness, calculate the yearly interest expenses: c. Using EBIT of S7,940,000, a 23% tax rate, and the information developed in parts (a) and (b), calculate the most likely earnings per share for the firm at various levels of indebtedness. Mark the level of indebtedness that maxinizes EPS. d. Using the EPS developed in part (c)1 the estimates of required roturn, rs and the equation P0= EPS/r indebtedness. Mark the level of indebtedness in the following table that results in the maximum price per share. P0. e. Prepare a recommendation to the board of directors of Moralos Publishing that spocifies the degree of indebtedness that will accomplish the firmis goal of optimizing sharaholder wealth. Use your findings in parts (a) through (d) to justily your recommendation. a. Create a spreadsheet showing values of debt and equity as well as the total number of shares, assuming a book value of $25 per share. Calculation of the values of debt and equity as west as the total number of shares below: (Round to the nearest dollar. Round the number of shares to the nearest ntegrative - Optimal capital structure The board of directors of Morales Publishing. Inc, has commissioned a captal structure study The company has total assets of $39,800,000. It has eamings before interest and taxes of $7.940.000 and is taxed at a rate of 23%. a. Create a spreadsheet showing values of debt and equity as well as the total number of shares, assuming a book value of \$25 per share b. Given the before-tax cost of debt at various levels of indebtedness, calculate the yearly interest expenses. c. Using EBIT of $7,940,000, a 23\% tax rate, and the information developed in parts (a) and (b), calculato the most likely earnings per share for the firm at various lavels of indebtednese, Mark the lovel of indebtedress that maxintzes EPS d. Using the EPS doveloped in part (c), the estimates of required retum, rx and the equatbon P0= EPSI/ , estmale: the value per share at various levels of indebtedness. Mark the fevel of indebtednens in the folloning table that rosuls in the maximum police per share. P0. e. Prepare a recommendation to the board of directors of Morales Publishing that specifies the degree of indebledness that will accomplish the flim's gool of optineing shareholder wealth. Use your findings in parts (a) through (d) to justify your recommendation. a. Create a spreadsheet showing values of debt and equity as well as the tocal number of aharus, alssuniag a book: value of $25 per share. Calculation of the values of debt and equity as well as the total number of shares below (Round to the hearest doliar: Rownd tha number of shares to the nearest integer)
