Solution-Find alternative capital structure

Find alternative capital structure

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Reference no: EM133113629

The company earned EBIT= $ 500.000 last year. This year the Company is planning payout dividend to its investors. 50% of shareholders are from Group of Management and the rest from capital market. The company has 100.000 shares in the capital market with current market $ 25 per share.

Alternative Capital Structure to materialize the planning:

Leverage (Wd)	Debt Interest rate (Rd)
0%	-
10%	8,0%
30%	8,5%
40%	10,0%
50%	12,0%

with effective tax rate 30%, Beta rate = 1, Free risk earning rate 6%, and market premium : 5%

Lev(Wd)	Debt	(R_d)	NI	NOPAT	TA	W_e	k_d	ROE	WACC
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
0%		-	500,000,000	350,000,000	2,500,000,000	92,86%	0	14,0%	13,00%
10%	250,000,000	8,0%	480,000,000	336,000,000	2,250,000,000	78,50%	5,60%	14,9%	12,26%
30%	675,000,000	8,5%	422,625,000	295,837,500	1,575,000,000	59,71%	5,95%	18,8%	10,88%
40%	630,000,000	10,0%	359,625,000	251,737,500	945,000,000	42,59%	7,00%	26,6%	10,60%
50%	472,500,000	12,0%	302,925,000	212,047,500	472,500,000	28,04%	8,40%	44,9%	10,70%

Could you explain the effect to capital structure and please identify the capital structure affect from the perspective of weighted average cost of capital and value of company!

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Reference no: EM133113629

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Find alternative capital structure

Reference no: EM133113629

Reference no: EM133113629

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