FIN $350$: Financial Principles

Home Assignment II $7$: Cap Structure

Total Points: $10$

Plymouth, Inc.

wishes to change its present capital structure $($D$/$E ratio$)$ from $(10\frac{S}{90}K)$ to $(20\frac{N}{30}N)n$

$B{r}_r=1\mathrm{.}30$

$R_1=3\mathrm{.}0\%$

$B=2\mathrm{.}0\%$

$f_m=12\mathrm{.}00x,$

zof shares outitanding $(n)=150$

$FC{F}_5=$$$300$

$8.=2\mathrm{.}0\%$

Current $r_0=6\mathrm{.}00\%,$

Tax rate $=30\mathrm{.}0\%,$

At the new capital structure $(20\frac{\%}{80}\%6),$ what will be their total riak $($BUN$?$

${}_0={}_c[1(1-T)(w_0{w}_1)]$

${}_1={}_c[1(1-T)(w_0{w}_v)]$

At the new capital structure $(\frac{200}{800}N,$ what will be their required cost of stock $($ n $])?$

$r_s=r_1{}_2(r_2-r_n)$

$[$Enter answer in decimal points, ef$.15\mathrm{.}75\%$ as $0\mathrm{.}1575$

$3.$ At the new capital structure $(20\frac{N}{80}N),$ their new $f_p=6\mathrm{.}5\%.$ What will be their cost of capital $($WACC$)?$

WACC $=w_0{r}_4(1-T)w_i{F}_s$

$[$Enter answer in decimal points, e$.$s$.15\mathrm{.}75\%$ as $0\mathrm{.}1575]$

$4.$ At the new capital structure $(20\frac{N}{s}oN),$ what is their Value of Operations $(Var)?$

$V_{00}=FC{F}_1(WACC-B)$

At the new capital structure $(\frac{200}{60}\%),$ What is the Value of Total Equily?

$E=w_s{V}_{os}$