Show the capital structure change

Reference no: EM13196159

This is an M&M world with corporate taxes. Sci-fi is originally all equity financed (unlevered). All earnings are paid out as dividends, and the growth rate is zero. The firm decides to issue $8,000,000 in debt at 6% and to use the proceeds to repurchase stock. The capital structure change is permanent (so debt is perpetual). Fill in all of the missing information in the table below.

	Unlevered	Levered
EBIT	7,500,000	7,500,000
INTEREST
EBT
Taxes (40%)
Net Income
#Shares	1,000,000
EPS
Unlevered return	10%	10%
Return on Equity r_S
Price
Firm Value (V)
WACC

Reference no: EM13196159

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