Question
Plymouth, Inc. wishes to change its present capital structure (D/E ratio) from (20%/80%) to (30%/70%). L = 1.20 Rf = 3.0%, rM = 11.00%, #
Plymouth, Inc. wishes to change its present capital structure (D/E ratio) from (20%/80%) to (30%/70%). L = 1.20 Rf = 3.0%, rM = 11.00%, # of shares outstanding (n) = 150 FCF0 = $300 gL= 2.0% Current rD = 6.00%, Tax rate = 25.0%
At the new capital structure (30%/70%), what will be their total risk (L)?
U = L [1 +(1 T) x (wD wS)]
L = U x [1 + (1 T) x (wD wS)]
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Foundations Of Financial Markets And Institutions
Authors: Franco Modigliani, Frank J. Jones, Michael G. Ferri, Frank J. Fabozzi
3rd Edition
0130180793, 978-0130180797
