Petit printing company has a total market value of $100 million, consisting of 1 million shares selling

Question:

Petit printing company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company’s EBIT is $13.24 million and its tax rate is 15%. Pettit can change its either by increasing its debt to 70% (based on market values) or decreasing it to 30%. If it decides to increase its use of leverage it must call its old bonds and issue new ones with a 12% If it decides to decrease its leverage, it will call its old bonds and replace them with new 8% bonds. The company will sell or repurchase stock at the new equilibrium price to complete the change. The firm pays out all earnings as dividends; hence its stock is a zero-growth stock. Its current is 14%. If it increases leverage, it will be 16%. If it decreases leverage it will be 13%. What is the firms WACC (WEIGHTED COST OF CAPITAL) and total corporate value under each Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...