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please show all work on excel La Camorra currently uses no debt financing (i.e. total capital equals total equity) but is considering a recapitalization to
please show all work on excel
La Camorra currently uses no debt financing (i.e. total capital equals total equity) but is considering a recapitalization to change its capital structure by issuing new debt and using the proceeds to buy back shares of common stock. You are given the following information about the firm, including the cost of debt (RD) at various levels of potential leverage (WD).
Unlevered Beta | 1.1 |
Risk-Free Rate | 3.40% |
Market Risk Premium | 7% |
Tax Rate | 34% |
Total Invested Capital | $1,200,000 |
Current # of Shares Outstanding | 135,000 |
Current Stock Price | $23.55 |
Initial Free Cash Flow (FCF0) | $250,000 |
FCF Constant Growth Rate | 3% |
Using the information above, complete the graph below:
Weight of Debt (WD) | 0% | 10% | 25% | 40% | 50% |
Cost of Debt (RD) | 0.00% | 5.40% | 5.60% | 6.80% | 8.40% |
Weight of Equity (WE) | |||||
Levered Beta | |||||
Cost of Equity (RE) | |||||
WACC | |||||
Firm Value | |||||
Debt Value | |||||
Equity Value | |||||
New # of Shares |
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