The following information relates to the market valuation of Ceel Ltd, assuming the two different capital...

  

Transcribed Image Text:

The following information relates to the market valuation of Ceel Ltd, assuming the two different capital structures and using the MM (no tax) approach, Financed by Item All Equity Equity and 10% Loan Eamings before interest (S) 600 000 500,000 Less Interest on loan ($) 150,000 Equals Earnings available to shareholders 600 000 450,000 Divided by Cost of equity (K) 0.15 0.18 Equals Market value of equity 4,000,000 2,500,000 Plus Market value of ican 1,500 000 Equals Total Market Value of company (S) 4,000,000 4,000,000 Assuming that there are no personal taxes, calculate the total market value of the company for both capital structures, where the company income tax rate is 30 cents in the dollar. (20 marks) The following information relates to the market valuation of Ceel Ltd, assuming the two different capital structures and using the MM (no tax) approach, Financed by Item All Equity Equity and 10% Loan Eamings before interest (S) 600 000 500,000 Less Interest on loan ($) 150,000 Equals Earnings available to shareholders 600 000 450,000 Divided by Cost of equity (K) 0.15 0.18 Equals Market value of equity 4,000,000 2,500,000 Plus Market value of ican 1,500 000 Equals Total Market Value of company (S) 4,000,000 4,000,000 Assuming that there are no personal taxes, calculate the total market value of the company for both capital structures, where the company income tax rate is 30 cents in the dollar. (20 marks)