Repeat the cost of capital calculations in Figure 12.8, assuming market value weights instead of book value
Question:
Repeat the cost of capital calculations in Figure 12.8, assuming market value weights instead of book value weights.
In figure 12.8
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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$2,200 $1,000 $1,200 55% $1,000 $1,400 $1,800 Equity (book value) Debt (book and market value) Debt/assets (%) EBIT/assets (%) $1,000 $1,000 $1,000 44% kd (before-tax) kd (after-tax) 10.00% 6.50% 18.00% 10.20% 6.63% 19.00% 10.30% 6.70% 20.00% 1 1.70% 7.61% 24.00% EBIT $420 41 379 133 $246 $300 82 458 160 $297 Interest 140 Earnings before tax Tax @ 35% 105 $195 $1,083 100 $10.83 $1.95 5.56 18.00% 182 $338 $1,407 100 $14.07 S3.38 4.17 15.06% Earnings after tax Equity (market value) Shares (thousands) Price per share $1,297 100 $12.97 $2.46 5.26 15.47% $1,487 100 $14.87 $2.97 5.00 14.09% Earnings multiple (times) k (based on BV weights)
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Related Book For
Financial Management Concepts and Applications
ISBN: 978-0132936644
1st edition
Authors: Stephen Foerster
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