Question: Can you help solve for b , c , and d for the attached finance Capital Structure Analysis problem. Capital Structure Analysis The Rivoli Company
Can you help solve for b c and d for the attached finance Capital Structure Analysis problem.
Capital Structure Analysis
The Rivoli Company has no debt outstanding, and its financial position is given by the following data: Bonds can be sold at a cost, mathrmrmathrmd of Rivoli is a nogrowth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time.
a What effect would this use of leverage have on the value of the firm?
I. Increasing the financial leverage by adding debt has no effect on the firm's value.
II Increasing the financial leverage by adding debt results in an increase in the firm's value.
III. Increasing the financial leverage by adding debt results in a decrease in the firm's value.
b What would be the price of Rivoli's stock? Do not round intermediate calculations. Round your answer to the nearest cent.
$ per share
c What happens to the firm's earnings per share after the recapitalization? Do not round intermediate calculations. Round your answer to the nearest cent.
The firm its EPS by $ d The $ EBIT given previously is actually the expected value from the following probability distribution:
Determine the timesinterestearned ratio for each probability. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places.
What is the probability of not covering the interest payment at the debt level? Do not round intermediate calculations. Round your answer to two decimal places.
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