Reference no: EM132950636

Four separate financial analysts have provided the following recommendations on the optimal leverage ratio (expressed as interest-bearing debt over interest-bearing debt plus the value of equity) that Bulgari should target to maximise its value:

• According to Analyst A, Bulgari should reduce its book leverage ratio to around 20%;
• Analyst B also focuses on the book leverage ratio but actually believes that it should go up to around 40%;
• Analyst C considers Bulgari's market leverage ratio and believes that this should ideally be around 10%, marginally lower than the current level;
• In contrast, according to Analyst D, the market leverage ratio targeted by Bulgari should significantly increase to a level of approximately 60%.

Problem 1: Evaluate the recommendations of the analysts using as many methods as possible. What is the best recommendation? Why? Do you have a recommendation that is preferable to all of those produced by the analysts?