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case3_05_2 - Sales Estimates Scenario Pessimistic Most...

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Sales Estimates Scenario Probability Unit Sales Dollar Sales Pessimistic 25% 11300 15820000 Most Likely 50% 28900 40460000 Optimistic 25% 46300 64820000 28850 Cost of Capital Amount borrowed Cost of Debt Cost of Equity 0 10% 10000000 7% 11% 15000000 8% 12% 20000000 10.75% 16% 25000000 14.25% 20% EBIT and ROI Calculations Plan A Pessimistic Most Likely Optimistic Sales Revenue 15820000 40460000 64820000 FC 3600000 3600000 3600000 VC 12995000 33235000 53245000 EBIT -775000 3625000 7975000 ROI -3.69% 17.26% 37.98% E(EBIT) 3612500 SD(EBIT) 3093617 0.86 CV(EBIT) 0.86 E(ROI) 17.20% SD(ROI) 14.73% CV(ROI) 0.86 Break-Even 14400 Plan B Pessimistic Most Likely Optimistic Sales Revenue 15820000 40460000 64820000 FC 4400000 4400000 4400000 VC 12543000 32079000 51393000 EBIT -1123000 3981000 9027000 ROI -4.68% 16.59% 37.61% E(EBIT) 3966500 -0.05 SD(EBIT) 3588596 CV(EBIT) 0.90 E(ROI) 16.53% SD(ROI) 14.95% CV(ROI) 0.90 Break-Even 17600 Company Value Cost of Debt Cost of Equity Debt Firm Value # of Founder's sha 10% 0 21,675,000 54,656 7% 11% 10,000,000 25,886,364 395,657 8% 12% 15,000,000 27,062,500 490,891 10.75% 16% 20,000,000 25,484,375 363,107 the founde to discuss change in (stock pric informatio control iss
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14.25% 20% 25,000,000 25,150,000 336,032 Cost of Capital After Tax Cost of Debt Cost of Equity Debt Equity Weight of Debt 10% 0 21,675,000 0.00% 4.20% 11% 10,000,000 15,886,364 38.63% 4.80% 12% 15,000,000 12,062,500 55.43% 6.45% 16% 20,000,000 5,484,375 78.48% 8.55% 20% 25,000,000 150,000 99.40% quantity TIE=1 19200 st. dev. 12375 mean 28850 Z - score -0.78 Prob. Of TIE<1 0.22 Scenario Level of Debt Scenario Prob. EBIT Interest 10,000,000
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