outlook.office365. Hll-aattia519@gmail.com-Gmail Student CIX Email Office of Inf Office 365 Outlook Download Edit and reply el Print , Data- -Com Excel Oniine Find 1 14 Case model 127/2018 4-26 Chapter 14. Capital Structure and Leverage This spreadsheet model is designed to be used in conjunction with the chapter's integrated case and the 4 related PowerPoint slide presentation. PART A 7 (3) What is the firm's return on invested capital (ROIC)? 9 EBI 10 Tax rate 11 Total invested capital 13 ROIC EBIT (1 T Total invested capital #DIV/0! 15 PART C consider two hypothetical firms, Firm U, with zero debt financing, and Firm L, with $10,000 of 12% debt. Both firms have $20,000 in invested capital and a 40% federal-plus-state tax rate. 17 18 (1) Complete the partial income statements and the firms' ratios. 20 21 22 Total capital for both firms Tax rate for both firms Debt ratio for Firm U 14 Case model Help l 2 4 6 outlook.office365.com Hil-antia519@gmaa.com-Gm Student CIX Email In Office 365 Outlook Download Edit and reply Excel Online Print Data- Find -Comments 21 22 23 24 Tax rate for both firms Debt ratio for Firm U Debt ratio for Firm L Cost of debt for Firm L FIRM L 27 TOTAL CAPITAL 28 EQUITY s0 0 $o $0 $0 s0 0.25 0.50 0.25 0.25 0.50 0.25 30 PROBABILITY 31 SALES 32 OPER COSTS 33 EBIT 34 INTEREST EXPENSE S0 0 36 TAXES (40% 37 NET INCOME so so so 39 ROIC 40 ROE #DIVO! #DIVio! #DIVO! #DIV/0! #DIVO! #DIVO 43 E(ROIC) 44 E(RO) 45 E(TIE) 14 Case model Help lmprove Oth , F3 esc 2 outlook.office365.com H-sattia519@gmail.com-Gmail Student CIX Email Office of Informa Office 365 Outlook Download Edit and reply Excel Online e, Print Find -Commer Data. 41 43 E(ROIC) 44 E(ROE) 45 E(TIE) #DIVO! DIVIO 47 SD(ROIC) 48 SDIROE) 49 SD(TIE) #0V101 #DIVOI x PART D 52 The cost of debt at different debt levels 54 Amount 55 Borrowed 56 D I Capital DIE Rating Ratio 0.0000 0.0000 0.0000 0.0000 0.00000.0000 0.00000.0000 $0 0.0000 0.0000 AA 0.0000 8.0% 0.0000 0000 BBB 9.0% 14.0 (3) Assume that shares could be repurchased at the current market price of $25 per share. Calculate CD's expected EPS and TIE at debt levels of $0, $250,000, $500,000, $750,000, and $1,000,000. How many shares would remain after recapitalization under each scenario? 14 Case model Help improw 2 3 4 6 outioolk -atta519@gmail.com- Omail Student C Emai Office 365 Outlook Download Edit and reply Excel Online ' Print Find -Comments Data- expected EPS and TIE at debt levels of $O, $250,000, s500,000, $750,000, and $1,000,000. How many shares would remain after recapitalization under each scenario? 62 64 Sales (last year) 65 Variable costs as a % of sales 66 Fixed costs 67 Total capital 68 Shares outstanding 69 Current stock price 70 BVPS 71 Tax rate 72 TRF 60% 2,000,000 $25 $25 73 RPM 74 1.0 12% 75 WACCr 76 The analysis for each debt level being considered (in thousands of dollars and shares) is shown below 78 79 EBIT 81 14 Case model Help improve d 6 20 2 4 6 outlook.office365.com com-Gmail Student CIX Email Instructions Office of Office 365 Outlook Download e Edit and reply -Print Data- Find -Comments 83 Earrings per share = 84 Thnes interest earned= At D- 88 Shares repurchased- 89 Remaining shares . 90 Eamings per share 10,000 91 Times Interest eamed $500,000 95 Shares repurchased 96 Remaining shares 97 Earnings per share 98 Times interest earned AtD $750,000 102 Shares repurchased 104 Earnings per share 105 Times interest earned 14 Case model Help improve Off 6 F3 1 2 a outlook.office365.cor -aattia519@gmail.com-Gmai Student CIX Email Instructions/Office of Inform Office 365 Outlook Download e Edit and reply Excel Online Print Data . Find-Comme At D$1,000,000 108 109 Shares repurchased 110 Remaining shares 111 Earnings per share 112 Times interest eamed 113 40,000 40,000 $0.00 (4) Using the Hamada equation, what is the cost of equity if CD recapitalizes with $250,000 of debt? 114 $500,000? $750,0007 $1,000,000? 115 116 TRF 117 RPM 118 119 Total capital 120 Tax rate 121 122 1.0 Amount D/ Capital DIE Levered Beta 1.00 | 0.00% s0 0.0000 0.0000 | 0.0000 1.00 0.00% 0.0000 0.0000 1.00 0.00% 0.0000 00000 1.00 1 000% 0.0000 125 0.0000 1.00 130 (5) What is the capital structure that minimizes CD's WACC? 14 Case model Help impra , 2 4 a outlook.office365.com -aattia519@gmail.com-Gmal Student CIX Email InstructionsOffice of Informati Office 365 Outlook Download Edit and reply Excel Oniine Print G ata nd Comment 00000-10.00001.00 1 0.00% 129 130 (5) 131 What is the capital structure that minimizes CD's WACC? 132 AmountD/Capital E/CapitalDE Levered 133 Borrowed 134 RatioBeta .00% 0.00% 1.00 0.00% $0 0.00% | 100 0.00% 100.00% | 0.00% | 1.00 1 0.00% | 8.0% | 4.80% | 0.00% 0.00% 0.00% | 100.00% | 0.00% | 1.00 | 0.00% | 9.0% | 540% | 0.00% 0.00% | 100.00% | 0.00% | 1.00 | 0.00% | 11.5%| 6.94% | 0.00% 137 138 139 100.00% 0.00% 1.00 0.00% 14.0% 1 8.40% 0.00% be the new stock price if CD recapitalizes with $250,000 of debt? ss00,000? $750,000? 140 $1,000,000? Recall that the payout ratio is 100%, so g = 0. 141 142 143 Borrowed 144 145 146 147 148 149 150 151 DPS $0 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00% | | #DIVO! #DIV/0! #DIV/0! #DIV/0! #DIV/0 ! 14 Case model Help Impn 2 3 4 6 outlook.office365. Hll-aattia519@gmail.com-Gmail Student CIX Email Office of Inf Office 365 Outlook Download Edit and reply el Print , Data- -Com Excel Oniine Find 1 14 Case model 127/2018 4-26 Chapter 14. Capital Structure and Leverage This spreadsheet model is designed to be used in conjunction with the chapter's integrated case and the 4 related PowerPoint slide presentation. PART A 7 (3) What is the firm's return on invested capital (ROIC)? 9 EBI 10 Tax rate 11 Total invested capital 13 ROIC EBIT (1 T Total invested capital #DIV/0! 15 PART C consider two hypothetical firms, Firm U, with zero debt financing, and Firm L, with $10,000 of 12% debt. Both firms have $20,000 in invested capital and a 40% federal-plus-state tax rate. 17 18 (1) Complete the partial income statements and the firms' ratios. 20 21 22 Total capital for both firms Tax rate for both firms Debt ratio for Firm U 14 Case model Help l 2 4 6 outlook.office365.com Hil-antia519@gmaa.com-Gm Student CIX Email In Office 365 Outlook Download Edit and reply Excel Online Print Data- Find -Comments 21 22 23 24 Tax rate for both firms Debt ratio for Firm U Debt ratio for Firm L Cost of debt for Firm L FIRM L 27 TOTAL CAPITAL 28 EQUITY s0 0 $o $0 $0 s0 0.25 0.50 0.25 0.25 0.50 0.25 30 PROBABILITY 31 SALES 32 OPER COSTS 33 EBIT 34 INTEREST EXPENSE S0 0 36 TAXES (40% 37 NET INCOME so so so 39 ROIC 40 ROE #DIVO! #DIVio! #DIVO! #DIV/0! #DIVO! #DIVO 43 E(ROIC) 44 E(RO) 45 E(TIE) 14 Case model Help lmprove Oth , F3 esc 2 outlook.office365.com H-sattia519@gmail.com-Gmail Student CIX Email Office of Informa Office 365 Outlook Download Edit and reply Excel Online e, Print Find -Commer Data. 41 43 E(ROIC) 44 E(ROE) 45 E(TIE) #DIVO! DIVIO 47 SD(ROIC) 48 SDIROE) 49 SD(TIE) #0V101 #DIVOI x PART D 52 The cost of debt at different debt levels 54 Amount 55 Borrowed 56 D I Capital DIE Rating Ratio 0.0000 0.0000 0.0000 0.0000 0.00000.0000 0.00000.0000 $0 0.0000 0.0000 AA 0.0000 8.0% 0.0000 0000 BBB 9.0% 14.0 (3) Assume that shares could be repurchased at the current market price of $25 per share. Calculate CD's expected EPS and TIE at debt levels of $0, $250,000, $500,000, $750,000, and $1,000,000. How many shares would remain after recapitalization under each scenario? 14 Case model Help improw 2 3 4 6 outioolk -atta519@gmail.com- Omail Student C Emai Office 365 Outlook Download Edit and reply Excel Online ' Print Find -Comments Data- expected EPS and TIE at debt levels of $O, $250,000, s500,000, $750,000, and $1,000,000. How many shares would remain after recapitalization under each scenario? 62 64 Sales (last year) 65 Variable costs as a % of sales 66 Fixed costs 67 Total capital 68 Shares outstanding 69 Current stock price 70 BVPS 71 Tax rate 72 TRF 60% 2,000,000 $25 $25 73 RPM 74 1.0 12% 75 WACCr 76 The analysis for each debt level being considered (in thousands of dollars and shares) is shown below 78 79 EBIT 81 14 Case model Help improve d 6 20 2 4 6 outlook.office365.com com-Gmail Student CIX Email Instructions Office of Office 365 Outlook Download e Edit and reply -Print Data- Find -Comments 83 Earrings per share = 84 Thnes interest earned= At D- 88 Shares repurchased- 89 Remaining shares . 90 Eamings per share 10,000 91 Times Interest eamed $500,000 95 Shares repurchased 96 Remaining shares 97 Earnings per share 98 Times interest earned AtD $750,000 102 Shares repurchased 104 Earnings per share 105 Times interest earned 14 Case model Help improve Off 6 F3 1 2 a outlook.office365.cor -aattia519@gmail.com-Gmai Student CIX Email Instructions/Office of Inform Office 365 Outlook Download e Edit and reply Excel Online Print Data . Find-Comme At D$1,000,000 108 109 Shares repurchased 110 Remaining shares 111 Earnings per share 112 Times interest eamed 113 40,000 40,000 $0.00 (4) Using the Hamada equation, what is the cost of equity if CD recapitalizes with $250,000 of debt? 114 $500,000? $750,0007 $1,000,000? 115 116 TRF 117 RPM 118 119 Total capital 120 Tax rate 121 122 1.0 Amount D/ Capital DIE Levered Beta 1.00 | 0.00% s0 0.0000 0.0000 | 0.0000 1.00 0.00% 0.0000 0.0000 1.00 0.00% 0.0000 00000 1.00 1 000% 0.0000 125 0.0000 1.00 130 (5) What is the capital structure that minimizes CD's WACC? 14 Case model Help impra , 2 4 a outlook.office365.com -aattia519@gmail.com-Gmal Student CIX Email InstructionsOffice of Informati Office 365 Outlook Download Edit and reply Excel Oniine Print G ata nd Comment 00000-10.00001.00 1 0.00% 129 130 (5) 131 What is the capital structure that minimizes CD's WACC? 132 AmountD/Capital E/CapitalDE Levered 133 Borrowed 134 RatioBeta .00% 0.00% 1.00 0.00% $0 0.00% | 100 0.00% 100.00% | 0.00% | 1.00 1 0.00% | 8.0% | 4.80% | 0.00% 0.00% 0.00% | 100.00% | 0.00% | 1.00 | 0.00% | 9.0% | 540% | 0.00% 0.00% | 100.00% | 0.00% | 1.00 | 0.00% | 11.5%| 6.94% | 0.00% 137 138 139 100.00% 0.00% 1.00 0.00% 14.0% 1 8.40% 0.00% be the new stock price if CD recapitalizes with $250,000 of debt? ss00,000? $750,000? 140 $1,000,000? Recall that the payout ratio is 100%, so g = 0. 141 142 143 Borrowed 144 145 146 147 148 149 150 151 DPS $0 $0.00 $0.00 $0.00 0.00% 0.00% 0.00% 0.00% 0.00% | | #DIVO! #DIV/0! #DIV/0! #DIV/0! #DIV/0 ! 14 Case model Help Impn 2 3 4 6