The EBIT and Interest paid @ $10\%$ P$.$A$.$ and the cost of equity of the

for the four firms X$,$ Y Z and W is given in image.

You are requested to

a$)$ Calculate the Total Market Value of each firm $?$

b$)$ Calculate the Weighted Average Cost of Capital of each firm $?$

c$)$ Assume that tax rate is zero

Hints : Calculate for each firm as follows

a$)$ EBT $=$ EBIT$-$ Interest $,$ EAT$($ ie PAT$)=$ EBT $($ As tax $-0)$

b$)$ Market Value of Equity $=$ EAT $/$ Ke of respective firm

c$)$ Market Value of Debt $=$

Interest paid by each firm $/$ Kd

$($ Kd$=$ cost of debt in this case it is $10\%$ in each case $)$

MV of each firm $=$ MV of equity of each firm $+$ MV of debt of each firm

$($ in Case the question had asked for Enterprise Value, you would

calculate as MV of Equity $+$ MV of Debt $-$Cash$/$ cash equivalent of each

firm $)$ In this case, Cash$/$ Cash equivalents are not given hence MV of the

firm $=$ MV of equity $+$ MV of Debt

d$)$ To Calculate the WACC of each firm, we find out for each firm as

Respective EBIT$($x$,$y$,$z$,$w$)/$ MV of the firm $($x$,$y$,$z$,$w$)$X $100$

Ie $\%$ of EBIT of the respective firm $/$ Total MV of respective firm.