Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.Table1: Information of the firms Unlevered firm Levered firm EBIT 20000 20000 Interest Taxable income Tax (tax rate: 34%) Net income CFFA Assuming that: The size of the debt is 8000; cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5 Fill in the blanks What is the present value of the tax shield? Calculate the following values:a) Calculate value of unlevered firm; b) value of the levered firm; c) equity value; d) Cost of equity; e) cost of capital; f) systematic risk of the equity Suppose that the firm changes its capital structure so that the debt-to-equity ratio is 1.6, then recalculate the systematic risk of the equity If the firm now has the following project: in year 0, the cashflow is 5000, in year 1, the cashflow is -5500. Based on the IRR rule, will this project be accepted?

Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table. Table1: Information of the firms Unlevered firm Levered firm EBIT 20000 20000...

Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.

Table1: Information of the firms

Assuming that: The size of the debt is 8000; cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5

Calculate the following values:
a) Calculate value of unlevered firm; b) value of the levered firm; c) equity value; d) Cost of equity; e) cost of capital; f) systematic risk of the equity

Suppose that the firm changes its capital structure so that the debt-to-equity ratio is 1.6, then recalculate the systematic risk of the equity

If the firm now has the following project: in year 0, the cashflow is 5000, in year 1, the cashflow is -5500. Based on the IRR rule, will this project be accepted?

Jun 04, 2022