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See attached, ADVANCED CORPORATE FINANCE. Topic covered: Introduction to Capital Structure and the Effect of Leverage on Earnings The Capital Structure Irrelevancy Principle: MM Propositions
See attached, ADVANCED CORPORATE FINANCE. Topic covered:
- Introduction to Capital Structure and the Effect of Leverage on Earnings
- The Capital Structure Irrelevancy Principle: MM Propositions I and II (No Taxes)
- MM Propositions I and II (With Taxes)
I have the questions, excel sheet with the calculations, and the result of what I got wrong. I need someone to look this over and correct the excel. I don't know what I am doing wrong.
Walker 180000 19000 Total Market Value EBIT Expansion EBIT Recession EBIT Assets Debt Equity D/E Ratio Interest Rate Shares Outstanding Share Price 27000 13000 Becket 69000 0.05 3000 1 Debt Issue Interest Rate Shares Outstanding Market-to-book Ratio 3450 $1,850.00 Valuation Price per share EPS Normal EPS Expansion EPS Recession %EPS Expansion %EPS Recession EPS Normal After Recapitalization EPS Expansion after Recapitalization EPS Recession after Recapitalization EPS Normal After Recapitalization W/Taxes EPS Expansion after Recapitalization W/Taxes EPS Recession after Recapitalization W/Taxes ROE Normal ROE Expansion ROE Recession ROE Normal After Recapitalization ROE Expansion after Recapitalization ROE Recession after Recapitalization ROE Normal After Recapitalization W/Taxes ROE Expansion after Recapitalization W/Taxes ROE Recession after Recapitalization W/Taxes Break-Even EBIT $60.00 6.33 9.00 4.33 42.11% -31.58% 5.18 7.85 3.18 2.97 4.70 1.67 11% 15% 7% 9% 13% 5% 5% 8% 3% 10100 35% Current Proposed 180000 180000 0 69000 180000 111000 N/A 0.621621622 N/A 0.05 3000 0 $60.00 $60.00 0.666666667 0.666666667 Particulars Recession Normal Expansion EBIT 13000 19000 27000 Shares Outsta 3000 3000 3000 EPS 4.33 6.33 9.00 ROE 7% 11% 15% EBIT Less: Interest EBT Less: Taxes EAT No. of Shares EPS ROE 13000 3450 9550 0 9550 3000 3.18 5% 19000 3450 15550 0 15550 3000 5.18 9% 27000 3450 23550 0 23550 3000 7.85 13% EBIT Less: Interest EBT Less: Taxes EAT No. of Shares EPS ROE 13000 3450 9550 4550 5000 3000 1.67 3% 19000 3450 15550 6650 8900 3000 2.97 5% 27000 3450 23550 9450 14100 3000 4.70 8% a. EBIT Less: Interest Earning before tax Less: Tax EAT EPS Cash flow 13,900.00 13,900.00 13,900.00 6.31818 631.82 b. EBIT Less: Interest Earning before tax Less: Tax EAT EPS Cash flow 13,900.00 6,160.00 7,740.00 7,740.00 3.51818 351.82 c. Required debt Shares to sell 5863.63636 84 a. Capital component Weight Debt 0.2 Equity 0.8 8%*(1-0.35)*0.2+0.8*Ke =14% Ke 16.2000% b. Ke 17.5325% Formula: Ke = Ku + (B / S ) (1 - tc ) (Ku - Kb ) a. VU = EBIT (1 - tC) / ru VL = VU + t C B Vu 218500.00 b. Vu VL 218500.00 232450.00 c. Ke Ke = Ku + (B / S ) (1 - tc ) (Ku - Kb ) 25.4211% d. WACC = (B / VL ) (1 - tc ) rb + (S / VL ) re WACC 37.2532% 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 218500.00 Vu 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Walker, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $19,000 if economic conditions are normal. If there is an expansion in the economy, then EBIT will be $27,000. If there is a recession, then EBIT will be $13,000. Beckett is considering a $69000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock (this is known as recapitalization). There are currently 3,000 shares outstanding. Beckett has a marketto-book ratio of 1.0. (For all problems, when using previous answers, use the rounded answer as it was given in the answer box). a) What is the current price per share for the firm's outstanding equity? b) Calculate earnings per share (EPS) under each of the three economic scenarios before the firm issues any debt. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places). c) Calculate the percentage change in EPS under the expansion and recession scenarios (relative to a normal economy) before any debt is issued. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). d) Calculate earnings per share (EPS) under each of the three economic scenarios assuming that the firm goes through with the recapitalization. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places) e) Repeat part (d) assuming a corporate tax rate of 35%. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places). f) Calculate return on equity (ROE) under each of the three economic scenarios before the firm issues any debt. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). g) Calculate return on equity (ROE) under each of the three economic scenarios assuming that the firm goes through with the recapitalization. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). h) Repeat part (g) assuming a corporate tax rate of 35%. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). i) What is the break-even EBIT under normal economic conditions between the levered and unlevered capital structures? Price per Share EPS Normal EPS Expansion EPS Recession %EPS Expansion %EPS Recession EPS Normal after Recapitalization EPS Expansion after Recapitalization EPS Recession after Recapitalization EPS Normal after Recapitalization with Taxes EPS Expansion after Recapitalization with Taxes EPS Recession after Recapitalization with Taxes ROE Normal ROE Expansion ROE Recession ROE Normal after Recapitalization ROE Expansion after Recapitalization ROE Recession after Recapitalization ROE Normal after Recapitalization with Taxes ROE Expansion after Recapitalization with Taxes ROE Recession after Recapitalization with Taxes Break-Even EBIT 2. Fletcher Corporation is debating whether to convert its all-equity capital structure to one that is 40% debt. Currently, there are 2200 shares outstanding selling at $70 per share. EBIT is expected to remain at $13900 per year forever. The interest rate on new debt is 6%, and there are no taxes. a) You currently hold 100 shares of Fletcher. What is your annual cash flow under the current capital structure? Assume that Fletcher has a 100% dividend payout ratio. (Round intermediate calculations to 5 decimal places. Round answer to 2 decimal places). b) What will be your annual cash flow under the proposed capital structure? (Round intermediate calculations to 5 decimal places. Round answer to 2 decimal places). c) Suppose that Fletcher goes through with the recapitalization, but you prefer the previous all-equity structure. You can unlever you position and re-create the original capital structure by selling a portion of your 100 shares and using that money to purchase the firm's debt issue. How many of your 100 shares must you sell? (Round intermediate calculations to 5 decimal places. Round answer to the nearest whole number). CF Under Current Structure CF Under Proposed Structure Shares Sold 3. Zorin Industries has a debt-equity ratio of 1.4. Its WACC is 14%, and its cost of debt is 8%. The corporate tax rate is 35% a) What is Zorin's cost of equity capital? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places) b) What is Zorin's unlevered cost of equity capital? Hint: MM Proposition II with Taxes (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) Zorin's Cost of Equity Capital Zorin's Unlevered Cost of Equity Capital 4. Cede & Co. expects its EBIT to be $76000 every year forever. The firm can borrow at 14%. Cede currently has no debt, and its cost of equity is 24%. The tax rate is 31%. Hint: MM Propositions I & II with Taxes. a) What is the value of the firm? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) b) What is the value of the firm if it borrows $45,000 and uses the proceeds to repurchase shares? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) c) What is the firm's cost of equity capital after recapitalization? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) d) What is the firm's WACC after recapitalization? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) Value of the Unlevered Firm Value of the Levered Firm Cost of Equity after Recapitalization WACC after Recapitalization Points Awarded 5.17 Points Missed 9.83 Percentage 34.5 % 1. Walker, Inc., has no debt outstanding and a total market value of $180,000. Earnings before interest and taxes, EBIT, are projected to be $19,000 if economic conditions are normal. If there is an expansion in the economy, then EBIT will be $27,000. If there is a recession, then EBIT will be $13,000. Beckett is considering a $69000 debt issue with a 5% interest rate. The proceeds will be used to repurchase shares of stock (this is known as recapitalization). There are currently 3,000 shares outstanding. Beckett has a marketto-book ratio of 1.0. (For all problems, when using previous answers, use the rounded answer as it was given in the answer box). a) What is the current price per share for the firm's outstanding equity? b) Calculate earnings per share (EPS) under each of the three economic scenarios before the firm issues any debt. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places). c) Calculate the percentage change in EPS under the expansion and recession scenarios (relative to a normal economy) before any debt is issued. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). d) Calculate earnings per share (EPS) under each of the three economic scenarios assuming that the firm goes through with the recapitalization. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places) e) Repeat part (d) assuming a corporate tax rate of 35%. (Round intermediate calculations to 5 decimal places. Round answers to 2 decimal places). f) Calculate return on equity (ROE) under each of the three economic scenarios before the firm issues any debt. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). g) Calculate return on equity (ROE) under each of the three economic scenarios assuming that the firm goes through with the recapitalization. Assume no taxes. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). h) Repeat part (g) assuming a corporate tax rate of 35%. (Round intermediate calculations to 5 decimal places. Round answers to 4 decimal places). i) What is the break-even EBIT under normal economic conditions between the levered and unlevered capital structures? Price per Share EPS Normal EPS Expansion EPS Recession %EPS Expansion %EPS Recession EPS Normal after Recapitalization EPS Expansion after Recapitalization EPS Recession after Recapitalization EPS Normal after Recapitalization with Taxes EPS Expansion after Recapitalization with Taxes EPS Recession after Recapitalization with Taxes ROE Normal ROE Expansion ROE Recession ROE Normal after Recapitalization ROE Expansion after Recapitalization ROE Recession after Recapitalization ROE Normal after Recapitalization with Taxes ROE Expansion after Recapitalization with Taxes ROE Recession after Recapitalization with Taxes Break-Even EBIT Table for Individual Question Feedback Points Earned: 4.0/11.0 Correct Answer(s): Price per Share: 60; EPS Normal: 6.33; EPS Expansion: 9; EPS Recession: 4.33; %EPS Expansion: 0.4218; %EPS Recession: -0.316; EPS Normal after Recapitalization: 8.41; EPS Expansion after Recapitalization: 12.73; EPS Recession after Recapitalization: 5.16; EPS Normal after Recapitalization with Taxes: 5.46; EPS Expansion after Recapitalization with Taxes: 8.27; EPS Recession after Recapitalization with Taxes: 3.36; ROE Normal: 0.1056; ROE Expansion: 0.15; ROE Recession: 0.0722; ROE Normal after Recapitalization: 0.1401; ROE Expansion after Recapitalization: 0.2122; ROE Recession after Recapitalization: 0.086; ROE Normal after Recapitalization with Taxes: 0.0911; ROE Expansion after Recapitalization with Taxes: 0.1379; ROE Recession after Recapitalization with Taxes: 0.0559; Break-Even EBIT: 9000 2. Fletcher Corporation is debating whether to convert its all-equity capital structure to one that is 40% debt. Currently, there are 2200 shares outstanding selling at $70 per share. EBIT is expected to remain at $13900 per year forever. The interest rate on new debt is 6%, and there are no taxes. a) You currently hold 100 shares of Fletcher. What is your annual cash flow under the current capital structure? Assume that Fletcher has a 100% dividend payout ratio. (Round intermediate calculations to 5 decimal places. Round answer to 2 decimal places). b) What will be your annual cash flow under the proposed capital structure? (Round intermediate calculations to 5 decimal places. Round answer to 2 decimal places). c) Suppose that Fletcher goes through with the recapitalization, but you prefer the previous all-equity structure. You can unlever you position and re-create the original capital structure by selling a portion of your 100 shares and using that money to purchase the firm's debt issue. How many of your 100 shares must you sell? (Round intermediate calculations to 5 decimal places. Round answer to the nearest whole number). CF Under Current Structure CF Under Proposed Structure Shares Sold Table for Individual Question Feedback Points Earned: 0.7/2.0 Correct Answer(s): CF Under Current Structure: 631.82; CF Under Proposed Structure: 773.03; Shares Sold: 40 3. Zorin Industries has a debt-equity ratio of 1.4. Its WACC is 14%, and its cost of debt is 8%. The corporate tax rate is 35% a) What is Zorin's cost of equity capital? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places) b) What is Zorin's unlevered cost of equity capital? Hint: MM Proposition II with Taxes (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) Zorin's Cost of Equity Capital Zorin's Unlevered Cost of Equity Capital Table for Individual Question Feedback Points Earned: 0.0/1.0 Correct Answer(s): Zorin's Cost of Equity Capital: 0.2632; Zorin's Unlevered Cost of Equity Capital: 0.1759 4. Cede & Co. expects its EBIT to be $76000 every year forever. The firm can borrow at 14%. Cede currently has no debt, and its cost of equity is 24%. The tax rate is 31%. Hint: MM Propositions I & II with Taxes. a) What is the value of the firm? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) b) What is the value of the firm if it borrows $45,000 and uses the proceeds to repurchase shares? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) c) What is the firm's cost of equity capital after recapitalization? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) d) What is the firm's WACC after recapitalization? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places. When using previous answers, use the rounded answer as it was given in the answer box) Value of the Unlevered Firm Value of the Levered Firm Cost of Equity after Recapitalization WACC after Recapitalization Table for Individual Question Feedback Points Earned: 0.5/1.0 Correct Answer(s): Value of the Unlevered Firm: 218500; Value of the Levered Firm: 232450; Cost of Equity after Recapitalization: 0.2566; WACC after Recapitalization: 0.2256 Question 1 Asstes Debt Equity D/E Ratio Interest Rate Shares Outstanding Share Price EBIT Tax Rate Taxes Interest Expense Net Income Recapitalization New Shares Reduced EBIT EPS % r EPS ROE Break Even EBIT Step 1 Step 2 Step 3 Break Even EBIT Normal Expansion Recession $ 180,000.00 $ 180,000.00 $ 180,000.00 $ - $ - $ $ 180,000.00 $ 180,000.00 $ 180,000.00 0 0 0 5.00% 5.00% 5.00% 3000.00 3000.00 3000.00 $ 60.00 $ 60.00 $ 60.00 $ 22,000.00 $ 31,000.00 $ 15,000.00 0% 0% 0% $ - $ - $ $ - $ - $ $ 22,000.00 $ 31,000.00 $ 15,000.00 0 0 0 0 0 0 0 0 0 $ 7.33 $ 10.33 $ 5.00 N/A 0.4093 -0.3179 0.1222 0.1722 0.0833 1.67 -6000 (0.67) 9,000.00 Question 2 Current Equity Debt Shares Outstanding Price/Share Interest Rate Shares Held Amount Levered EBIT Interest EBT Taxes Earnings New Shares CF Shares Sold Proposed 100% 0% 2100.00 $ 67.00 4.00% 100 13,800 $ 13,800.00 $ $ - $ 13,800 657.14 60% 40% 2100.00 67.00 0.04 100.00 56,280 13,800 2,251 11,548.80 11,549 1,260 916.57 40 Normal(Recap) $ $ $ $ $ $ $ $ $ $ N/A Question 1 Expansion(Recap) Recession(Recap) Normal(Taxes) 180,000.00 $ 180,000.00 $ 180,000.00 $ 180,000.00 72,000.00 ### $ 72,000.00 $ 72,000.00 108,000.00 $ 108,000.00 $ 108,000.00 $ 108,000.00 2/3 2/3 2/3 2/3 5.00% 5.00% 5.00% 5.00% 3000.00 3000.00 3000.00 3000.00 60.00 $ 60.00 $ 60.00 $ 60.00 22,000.00 $ 31,000.00 $ 15,000.00 $ 22,000.00 0% 0% 0% 35% - $ - $ - $ 7,700.00 3,600.00 $ 3,600.00 $ 3,600.00 $ 3,600.00 18,400.00 $ 27,400.00 $ 11,400.00 $ 10,700.00 1,200.00 1,200.00 1,200.00 1,200.00 1,800.00 1,800.00 1,800.00 1,800.00 18,400.00 $ 27,400.00 $ 11,400.00 $ 11,960.00 10.22 $ 15.22 $ 6.33 $ 6.64 N/A N/A N/A 0.1704 0.2537 0.1056 0.1107 1.67 Question 3 D/E WACC Cost of Debt Tax Rate Cost of Equity Cost of Equity Unlevered Question 4 1.4 (B/S) =1.4/2.4 0.13 0.07 RB 0.35 Tc 0.12=(1/2.4)Re+(1.4/2.4)(0.06)(1-0.35) 0.2334=Ru+(Ru-0.06)(1.4)(1-.35) 1.4 (B/S) = 1.4/2.4 12.00% 6.00% RB 35.00% Tc EBIT Cost of Borrowing Cost of Equity Tax Rate Amount Borrowed Unlevered Value Levered Value Equity Cost of Equity Total Value WACC Expansion(Taxes) Recession(Taxes) $ 180,000.00 $ 180,000.00 $ 72,000.00 $ 72,000.00 $ 108,000.00 $ 108,000.00 2/3 2/3 5.00% 5.00% 3000.00 3000.00 $ 60.00 $ 60.00 $ 31,000.00 $ 15,000.00 35% 35% $ 10,850.00 $ 5,250.00 $ 3,600.00 $ 3,600.00 $ 16,550.00 $ 6,150.00 1,200.00 1,200.00 1,800.00 1,800.00 $ 17,810.00 $ 7,410.00 $ 9.89 $ 4.12 N/A N/A 0.1649 0.0686 Question 4 $ $ $ $ $ 72,000 0.14 0.24 0.31 45,000 207,000.00 220,950.00 175,950.00 0.2576 427,950.00 0.2248 Walker 180000 19000 Total Market Value EBIT Expansion EBIT Recession EBIT Assets Debt Equity D/E Ratio Interest Rate Shares Outstanding Share Price 27000 13000 Becket 69000 0.05 3000 1 Debt Issue Interest Rate Shares Outstanding Market-to-book Ratio 3450 $1,850.00 Valuation Price per share EPS Normal EPS Expansion EPS Recession %EPS Expansion %EPS Recession EPS Normal After Recapitalization EPS Expansion after Recapitalization EPS Recession after Recapitalization EPS Normal After Recapitalization W/Taxes EPS Expansion after Recapitalization W/Taxes EPS Recession after Recapitalization W/Taxes ROE Normal ROE Expansion ROE Recession ROE Normal After Recapitalization ROE Expansion after Recapitalization ROE Recession after Recapitalization ROE Normal After Recapitalization W/Taxes ROE Expansion after Recapitalization W/Taxes ROE Recession after Recapitalization W/Taxes Break-Even EBIT - $60.00 6.33 9.00 4.33 0.4211 0.3158 Right answer 5.18 8.41 7.85 12.73 3.18 5.16 2.97 5.46 4.70 8.27 1.67 3.36 0.1056 0.1500 0.0722 0.0864 0.1401 0.1308 0.2122 0.0531 0.086 0.0494 0.0911 0.0783 0.1379 0.0278 0.0559 10100 9000 35% Current Proposed 180000 180000 0 69000 180000 111000 N/A 0.621621622 N/A 0.05 3000 0 $60.00 $60.00 0.666666667 0.666666667 Particulars Recession Normal Expansion EBIT 13000 19000 27000 Shares Outsta 3000 3000 3000 EPS 4.33 6.33 9.00 ROE 7% 11% 15% EBIT Less: Interest EBT Less: Taxes EAT No. of Shares EPS ROE 13000 3450 9550 0 9550 3000 3.18 5% 19000 3450 15550 0 15550 3000 5.18 9% 27000 3450 23550 0 23550 3000 7.85 13% EBIT Less: Interest EBT Less: Taxes EAT No. of Shares EPS ROE 13000 3450 9550 4550 5000 3000 1.67 3% 19000 3450 15550 6650 8900 3000 2.97 5% 27000 3450 23550 9450 14100 3000 4.70 8% a. EBIT Less: Interest Earning before tax Less: Tax EAT EPS Cash flow 13,900.00 13,900.00 13,900.00 6.31818 631.82 b. EBIT Less: Interest Earning before tax Less: Tax EAT EPS Cash flow 13,900.00 13,900.00 6,160.00 5,560.00 7,740.00 8,340.00 7,740.00 5.86364 Right Answer 586.36 773.03 c. Current Proposed Equity 100% 60% Debt 0% 40% Shares Outstanding 2100.00 2100.00 Price/Share 67.00 67.00 Interest Rate 4.00% 0.04 Shares Held 100 100.00 Amount Levered 56,280 EBIT 13,800 13,800 Interest 2,251 EBT $ 13,800.00 $ 11,548.80 Taxes $ - $ Earnings 13,800 11,549 New Shares 1,260 CF 657.14 916.57 Shares Sold 40 a. Capital component Weight Debt 0.2 Equity 0.8 8%*(1-0.35)*0.2+0.8*Ke =14% Right answer Ke 0.1620 0.2632 b. Ke 0.1753 0.1759 Formula: Ke = Ku + (B / S ) (1 - tc ) (Ku - Kb ) a. Vu b. Vu VL VU = EBIT (1 - tC) / ru VL = VU + t C B 218500.00 218500.00 232450.00 c. = Ku + (B / S ) (1 - tc ) (Ku - Kb ) 0.2542 0.2566 Ke Ke d. 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