Corporate Finance Assignment

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Sheet1

1
Mket value 275,000
EBIT 21,000
Number of shares 5,000
Debt issue 99,000
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 0 0 0
Net income 12,600 21,000 26,250
Numer shares 5,000 5,000 5,000
EPS 2.52 4.20 5.25
-40% 25%
Share price 55
Number of shares 1,800
Interest expense 7,920
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 7,920 7,920 7,920
Net income 4,680 13,080 18,330
Numer shares 3,200 3,200 3,200
EPS 1.46 4.09 5.73
-64% 40%
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 0 0 0
EBT 12,600 21,000 26,250
Tax expense 4,410 7,350 9,188
Net income 8,190 13,650 17,063
Numer shares 5,000 5,000 5,000
EPS 1.64 2.73 3.41
-40% 25%
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 7,920 0 7,920 0 7,920
EBT 4,680 13,080 18,330
Tax expense 1,638 4,578 6,416
Net income 3,042 8,502 11,915
Numer shares 3,200 3,200 3,200
EPS 0.95 2.66 3.72
-64% 40%
Market to book value of 1
ROE= Net income / Equity
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 0 0 0
Net income 12,600 21,000 26,250
Numer shares 5,000 5,000 5,000
EPS 2.52 4.20 5.25
-40% 25%
ROE 4.58% 7.64% 9.55%
-40% 25%
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 7,920 7,920 7,920
Net income 4,680 13,080 18,330
Numer shares 3,200 3,200 3,200
EPS 1.46 4.09 5.73
-64% 40%
ROE 2.66% 7.43% 10.41% 55
-64% 40% 176,000
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 0 0 0
EBT 12,600 21,000 26,250
Tax expense 4,410 7,350 9,188
Net income 8,190 13,650 17,063
Numer shares 5,000 5,000 5,000
EPS 1.64 2.73 3.41
-40% 25%
ROE 2.98% 4.96% 6.20%
-40% 25%
Recession Normal Expansion
EBIT 12,600 21,000 26,250
Interest 7,920 0 7,920 0 7,920
EBT 4,680 13,080 18,330
Tax expense 1,638 4,578 6,416
Net income 3,042 8,502 11,915
Numer shares 3,200 3,200 3,200
EPS 0.95 2.66 3.72
-64% 40%
ROE 1.73% 4.83% 6.77%
-64% 40%
12
Debt/equity ratio 1.50
WACC 0.11
CD 0.07
Ctax 0.35
WACC= wd*cd*(1-tx)+we*ce =(0,6*0,07*(1-0,35))+(0,4*CE)
D/E=1,5 E= D/1,5
WE= E/(E+D) WE= D/1,5 /(D/1,5+D)
WE 0.400
WD 0.60
=(0,6*0,07*(1-0,35))+(0,4*CE)
0.027 + 0,4CE = 0,11
-0.083 =-0,4CE
0.208 CE
RS= R0+(Ro-Rb)*(B/S)*(1-tc)
0,208=R0+(R0-0,07)*1,5*(1-0,35)
+0,208 = 0.975 R0 -0.068 + R0
0 0.276 = 1,975R0
R0= 0.140
Debt equity ratio = 2
D/E=2
D=2E
WE = E/(D+E)
WE E / 3E = 0.333
WD 0.667
=(0,667*0,07*(1-0,35))+(0,333*CE)
0.030 + 0,333CE = 0.110
0,333CE = 0.080
CE = 0.239
RS= R0+(Ro-Rb)*(B/S)*(1-tc)
17
EBIT 57,000.00
Debt 90,000.00
tx 0.35
Debt 0.08 shares
Lvered 2,300,000.00
price 105.00
Unlevered cost of capital 0.15
Value= 247,000.00
Value Levered= VU+(tc*Debt)
278,500.00
18.00
EBIT 19,750.00
CE 0.15
Perpetuity = Cash Flow/rate
85,583.33
Borrow 0.10
Tax 0.35
Debt = 50% of unlevered value 42,791.67
VL=VU+tax*debt 100,560.42
VL at 100%debt 115,537.50
19.00
Loan 1,800,000.00
Equal installments 2 years
interest 0.08
Tax 0.35
years Loan balance Interest Tax shield
0.00 1,800,000.00
1.00 900,000.00 144,000.00 50,400.00 46,666.67
2.00 0.00 72,000.00 25,200.00 21,604.94
68,271.60
20.00
20.00
Apha
number shares 15,000.00
Price 30.00
Beta
market value of debt 365,000.00
CD 0.09
EBIT 75,000.00 perpetuity
Value of alpha 450,000.00
Value of Beta 450,000.00 65000+385000
Cost to acquire 20% of equity
Value of alpha 90,000.00
Value of Beta 77,000.00
Dollar return alpha 15,000.00
Dollar return Beta 75,000.00
5,850.00
69,150.00
13,830.00
Alpha 500,000.00 number of shares
1,000,000.00 Value
2.00 Price per share
New project 100,000.00
Debt 500,000.00
Equity 500,000.00
250,000.00