The company earned EBIT= $ 500.000 last year. This year the Company is planning payout dividend to
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The company earned EBIT= $ 500.000 last year. This year the Company is planning payout dividend to its investors. 50% of shareholders are from Group of Management and the rest from capital market. The company has 100.000 shares in the capital market with current market $ 25 per share.
Alternative Capital Structure to materialize the planning:
Leverage (Wd) | Debt Interest rate (Rd) |
0% | - |
10% | 8,0% |
30% | 8,5% |
40% | 10,0% |
50% | 12,0% |
with effective tax rate 30%, Beta rate = 1, Free risk earning rate 6%, and market premium : 5%
Could you explain the effect to capital structure and please identify the capital structure affect from the perspective of weighted average cost of capital and value of company! If answer this
Lev (Wd) | Debt | (Rd) | NI | NOPAT | TA | We | kd | ROE | WACC |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) |
0% | - | 500,000,000 | 350,000,000 | 2,500,000,000 | 92,86% | 0 | 14,0% | 13,00% | |
10% | 250,000,000 | 8,0% | 480,000,000 | 336,000,000 | 2,250,000,000 | 78,50% | 5,60% | 14,9% | 12,26% |
30% | 675,000,000 | 8,5% | 422,625,000 | 295,837,500 | 1,575,000,000 | 59,71% | 5,95% | 18,8% | 10,88% |
40% | 630,000,000 | 10,0% | 359,625,000 | 251,737,500 | 945,000,000 | 42,59% | 7,00% | 26,6% | 10,60% |
50% | 472,500,000 | 12,0% | 302,925,000 | 212,047,500 | 472,500,000 | 28,04% | 8,40% | 44,9% | 10,70% |
Is it correct?
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