3. Using the following data, show that V-D+E 0% debt / 100% equity 25% debt/75% equity 50% debt/50% equity 0 2.500 5000 10.000 7,500 5000 4% 4% 4% book value of debt book value of equity pretax cost of debt Cash flow to creditors: Interest Value of debt . 2 ? 2 2 ? 2 1.265.82 1.265.82 ? ? Cash flow to shareholders: EBIT Interest Pretax Profit Taxes @ 21% Net income add depreciation less capital exp Residual Cash flow ? ? ? ? 2 1.265.82 2 2 ? ? 500 -500 ? 500 -500 500 -500 2 Cost of Equity (from previous sheet) 2 2 ? Value of equity ? ? ? Firm Value=Value of equity plus value of debt 2