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VanMannen Foundations, Inc. (VF)EBIT =$80,000Growth =0%Orig cost of equity, rs =10.0%No. of shares =10,000
VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below.
Price per share =$60.00
Tax rate =25%
Refer to the data for VanMannen Foundations, Inc. (VF). Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, what would be VF's new WACC and its new value of operations?
New interest rate = rd =6.00%
New cost of equity = rs =10.75%
New Debt/Value = wd =20%
New Equity/Value = ws =80%
WACC Value
a. 9.50% $631,579
b. 10.40% $670,237
c. 10.10% $657,095
d. 9.80% $644,211
e. 10.70% $683,641
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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