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Operating income 50000, cost of debt 10% and outstanding debt 2,00,000. If the overall capitalisation rate is 12.5%, i) calculate the total value of the

Operating income 50000, cost of debt 10% and outstanding debt 2,00,000. If the overall capitalisation rate is 12.5%,

i) calculate the total value of the firm and the equity capitalisation rate.

ii) Evaluate the outcome if debt increases to 3,00,000 to repurchase equity share.

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i To calculate the total value of the firm and the equity capitalisation rate we can use the net income approach According to this approach the total ... blur-text-image

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