Calculate the Value of Assets 0% Debt/ 25% Debt/ 50% Debt/ 100% Equity 75% Equity 50% Equity

 

 Calculate the Value of Assets 

 

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0% Debt/ 25% Debt/ 50% Debt/ 100% Equity 75% Equity 50% Equity Book Value of Debt Book Value of Equity $2,500 $5,000 $10,000 $7,500 $5,000 Market Value of Debt $2,500 $5,000 Market Value of Equity $10,000 $8,350 $6,700 Pretax Cost of Debt 5.00% 5.00% 5.00% After-Tax Cost of Debt 3.30% 3.30% 3.30% Market Value Weights of Debt 0% Equity 100% Levered Beta [formula already inserted] 0.80 #DIV/0! #DIV/0! Risk-Free Rate 5.0% 5.0% 5.0% Market Premium 6.0% 6.0% 6.0% Cost of Equity Weighted-Average Cost of Capital EBIT $1,485 $1,485 $1,485 Taxes (@ 34%) EBIAT + Depreciation $500 $500 $500 - Capital exp. ($500) ($500) ($500) +Change in net working capital Free Cash Flow 0% Debt/ 25% Debt/ 50% Debt/ 100% Equity 75% Equity 50% Equity Book Value of Debt Book Value of Equity $2,500 $5,000 $10,000 $7,500 $5,000 Market Value of Debt $2,500 $5,000 Market Value of Equity $10,000 $8,350 $6,700 Pretax Cost of Debt 5.00% 5.00% 5.00% After-Tax Cost of Debt 3.30% 3.30% 3.30% Market Value Weights of Debt 0% Equity 100% Levered Beta [formula already inserted] 0.80 #DIV/0! #DIV/0! Risk-Free Rate 5.0% 5.0% 5.0% Market Premium 6.0% 6.0% 6.0% Cost of Equity Weighted-Average Cost of Capital EBIT $1,485 $1,485 $1,485 Taxes (@ 34%) EBIAT + Depreciation $500 $500 $500 - Capital exp. ($500) ($500) ($500) +Change in net working capital Free Cash Flow

Answer rating: 100% (QA)

SOLUTION Based on the information provided we can calculate the value of assets for each ... View the full answer