Question
Q.2 Firms A and B are identical in their business activity. Both have following annual data: EBITDA= 5,000.00; Depreciation=1,000.00; TAX=20% ; OWC=0 and CAPEX=1,000.00 Firm
Q.2 Firms A and B are identical in their business activity. Both have following annual data: EBITDA= 5,000.00; Depreciation=1,000.00; TAX=20% ; OWC=0 and CAPEX=1,000.00
Firm A has no debt; Firm B carries $30,000 debt with 10% annual coupon. Both firms pay out all cash left after paying all business payments and taxes. Which firm pays more to its stakeholders (i.e., bond and stockholders) and if firm B pays out more, then why?
Assume that these firms operate in perpetuity and calculate their enterprise value (i.e., value of stocks and bonds combined).Make an argument for use of NOPAT.
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
