Author Question: Based on the information below, what is Ezzel Enterprises optimal capital structure? (Read 458 times)

petersan · **on:** Aug 7, 2023

Question 1

Assuming the following variables, what is the value of the firm according to MM with corporate taxes?

EBIT: $340,000 r_d: 13% T_c: 35%

Debt: $600,000 r_sU: 18%

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$1,275,875

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$1,337,500

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$1,437,778

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$1,546,250

Question 2

Based on the information below, what is Ezzel Enterprises’ optimal capital structure?

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Debt = 30%; Equity = 70%; EPS = $3.02; Common share price = $28.50

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Debt = 50%; Equity = 50%; EPS = $3.24; Common share price = $30.90

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Debt = 85%; Equity = 15%; EPS = $3.76; Common share price = $33.60

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Debt = 65%; Equity = 35%; EPS = $3.51; Common share price = $35.90

xinyifff · **Reply #1 on:** Aug 7, 2023

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