Question 6 (1 point) Assume you have just been hired as business manager of Sunbucks, a coffee shop located adjacent to campus. The firm is currently financed with 90% equity and 10% debt; it has 50,000 shares outstanding. The management group owns about 50 percent of the stock, and the stock is traded in the over-the-counter market. The company's EBIT was $100,000 last year, and since the university's enrollment is capped, EBIT is expected to remain constant (in real terms) over time. Since no expansion capital will be required, Sunbucks plans to pay out all earnings as dividends. You suggested to your new boss that the firm should engage in a capital restructure by issuing more debt and use the proceeds to repurchase stocks. Your boss encouraged you to pursue the idea. As a first step, assume that you obtained from the firm's investment banker the following estimated costs of debt for the firm at different capital structures: Sunbucks is in the 30 percent state-plus-federal corporate tax bracket, its current beta is 1.5 , the risk-free rate is 5 percent, and the market risk premium is 7 percent. 5. Calculate the resulting Price Per Share of Sunbucks under the optimal capital structure after share repurchase. $7.88 $6.93 $8.92 $12.11 $3.84 Calculate the number of shares to be repurchased under the optimal capital structure. 22,44355,62427,55730,46019,540 2. Calculate WACC under the optimal capital structure of Sunbucks. 14.17% 14.74% 15.87% 11.79% 12.48% Question 3 (1 point) 3. Calculate the resulting value of the debt that will be issued under the optimal capital structure for Sunbucks. $252,319$239,143$294,304$174,297$197,158 Question 4 (1 point) 4. Calculate the resulting market value of equity under the optimal capital structure before share repurchase. $505,549 $446,006 $435,346 $491,978 $496,454 The next a few questions will be based on the following information: Assume you have just been hired as business manager of Sunbucks, a coffee shop located adjacent to campus. The firm is currently financed with 90% equity and 10% debt; it has 50,000 shares outstanding. The management group owns about 50 percent of the stock, and the stock is traded in the over-the-counter market. The company's EBIT was $100,000 last year, and since the university's enrollment is capped, EBIT is expected to remain constant (in real terms) over time. Since no expansion capital will be required, Sunbucks plans to pay out all earnings as dividends. You suggested to your new boss that the firm should engage in a capital restructure by issuing more debt and use the proceeds to repurchase stocks. Your boss encouraged you to pursue the idea. As a first step, assume that you obtained from the firm's investment banker the following estimated costs of debt for the firm at different capital structures: Sunbucks is in the 30 percent state-plus-federal corporate tax bracket, its current beta is 1.5 , the risk-free rate is 5 percent, and the market risk premium is 7 percent. 1. Calculate the Unlevered Beta for Sunbucks. 1.2000 1.3500 1.1889 1.1188 1.3918 1.2134