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Today is 31 December 2022. Beer producer Mou is reviewing its financials, as it is considering a diversification and expansion plan. Since you work for
Today is 31 December 2022. Beer producer Mou is reviewing its financials, as it is considering a diversification and expansion plan. Since you work for IE Consulting Ltd., the firm asks you to give an opinion as to what is the optimal capital structure (from 0% to 90% debt). a. Current EBIT =$760mn b. Tax rate =38% c. For FCF, assume no investments or amortizations d. Levered Beta =0.9 e. Risk Free Rate =13.5% f. Risk Premium =5% g. Number of shares (mn)=180 h. Current Share Price =$23 i. Current debt =$100mn. Cash =$30mn j. Cost of debt: Premium over risk free rate (see table below, as a function of level of leverage). Once the optimal level of debt is determined, please advise on its suggested breakdown (bonds, loans, lines of credit, tenor,...). (35 points)
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