Determine the value of the firm

Reference no: EM131936882

Question: 1. Assume that a firm has no debt in its capital structure. It has expected NOI of sh.100,000 and equity capitalization rate Ke of 10%. Since it is all equity financed, WACC = cost of equity(Ke) i.e 10% Required: Determine the value of the firm

2: Assume the firm in question 1 is able to change its capital structure replacing equity by debt of sh.300,000. The cost of debt is 5% Determine

i. The value of the firm

ii. The WACC

3. Suppose the firm uses more debt in place of equity and increases debt to sh.900,000. Cost of debt is 5%. Ke= 10% and NOI is sh.100,000 Determine the value of the firm and the firm's WACC

Reference no: EM131936882

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