You're the CFO of Fishing Fun Inc. The company has expected EBIT of BDT 50 million every year

forever. The company currently has an all equity capital structure with 694,177 shares outstanding.

Company's shares are currently trading in market for BDT 170. The company's past dividend

payments are given below:

Year Dividend per

share (BDT)2019 122018 102017 92016 7.52015 62014 5Fishing Fun is evaluating a project to expand it's business in South America. This project would

enable the company to generate yearly revenue of BDT 5 million and incur operating cost of BDT 2

million. The project has 5 years life and would cost 10 million to purchase. The additional setup cost

of the project would be BDT 100,000. This project will require an initial investment in current assets

worth BDT 300,000, of which BDT 150,000 will be raised from current liability. The investment in

working capital will grow by 10% till 3rd year of the project. The project will be depreciated using 3

years MACRS and can be scraped for BDT 1 million after the useful life is over. The average tax rate is

35%.

Fishing Fun is also contemplating capital restructuring. They have assessed that the borrowing rate

would be 12% if they're levered. The company plans for a target debt-equity ratio of 0.67.

Assuming zero bankruptcy cost (MM Case II), what would be the firm value with all equity

capital structure? What would be the firm value after capital restructuring? Will you go for

capital restructuring? Justify your decision