Capital Structure. Here is a simplified balance sheet for Epicure Pizza (figures in $ millions): Assets Liabilities and Shareholders’ Equity Current assets $80 Current liabilities $60 Fixed assets 125...

Capital Structure.
Here is a simplified balance sheet for Epicure Pizza (figures in $ millions):

Assets		Liabilities and Shareholders’ Equity
Current assets	$80	Current liabilities	$60
Fixed assets	125	Long-term debt	65
		Equity	80
Total	$205	Total	$205

Note:
There are 16 million shares outstanding.
Epicure shares are currently priced at $12 each. (LO13-3)

You wish to calculate Epicure’s WACC. What is the relevant figure for the company’s debt ratio?

You now realize that since Epicure issued its debt, interest rates have fallen substantially. Do you need to revise your measure of the debt ratio upward or downward?

Jun 07, 2022

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