1. What is the estimated total asset value and total equity value under each scenario? Estimated Asset Value = Cash flow / WAAC Estimated Equity Value = Estimated Asset Value Liabilities

Scenario	1	2	3	4	5	6	7
Asset Value (000)	$20,000	$2,117,298.33	$2,227,171.49	$2,328,288.71	$2,403,846.15	$2,469,135.80	$2,512,562.81
Equity Value (000)	$20,000	$1,917,298.33	$1,827,171.49	1,728,288.71	$1,603,846.15	$1,469,135.80	$1,312,562.81

j. What is the estimated market value per share including the special cash dividend?

Scenario	1	2	3	4	5	6	7
Value per Share	$20.00	$18.78	$16.00	$14.00	$12.00	$10.00	$8.00
Dividend per Share	$2.00	$2.00	$4.00	$6.00	$8.00	$10.00	$12.00
Total Value per Share	$22.00	$20.78	$20.00	$20.00	$20.00	$20.00	$20.00

k. It is also useful to determine the effect of recapitalization on earnings per share. Calculate the EPS under each debt scenario. EPS = Net Income / Outstanding Shares

Scenario	1	2	3	4	5	6	7
Earnings per Share	$3.00	$	$	$	$	$	$

l. Which scenario provides the optimal debt-to-equity ratio for Napoli Pizza? Why?

m. Briefly explain the trade-offs between debt and equity financing. Debt involves borrowing money directly, while equity means selling a stake in your company in the hopes of securing financial backing. Both have pros and cons, and many businesses choose to use a combination of the two financing solutions.

14. Suppose you discovered Napolis had more business risk (operating leverage) than you originally estimated. Describe how this would impact your analysis. What if they had less business risk than originally estimated?