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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
(Rd)
NI
NOPAT
TA
We
kd
ROE
WACC
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
500,000,000
350,000,000
2,500,000,000
92,86%
0
14,0%
13,00%
250,000,000
480,000,000
336,000,000
2,250,000,000
78,50%
5,60%
14,9%
12,26%
675,000,000
422,625,000
295,837,500
1,575,000,000
59,71%
5,95%
18,8%
10,88%
630,000,000
359,625,000
251,737,500
945,000,000
42,59%
7,00%
26,6%
10,60%
472,500,000
302,925,000
212,047,500
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! If answer this
Is it correct?
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