Question: solve the fifth question step by step (ii) Compute the value of the two firms using using NOtapproach. MM 5. A company's current operating income

solve the fifth question step by step (ii) Compute the value

solve the fifth question step by step

(ii) Compute the value of the two firms using using NOtapproach. MM 5. A company's current operating income is Rs. 400,000 . The firm has Rs. 1000,000 of 10% debt outstanding. Its cost of equity capital is estimated to be 15%. a. Determine the current value of the firm, using traditional valuation approach; b. Calculate the firm's overall capitalization rate; c. The firm is considering to increase its leverage by raising an additional Rs.500,000 debt and using the proceeds to retire that amount of equity. As a result of increased financial risk, KD, is likely to go up to 12% and KE to 18%. Would you recommend the plan? XYZ Manufacturing Co., has a total capitalization of Rs.1000,000 and normally earns Rs.100,000 EBIT. The financial

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