solution_replacement questions - Total Assets (million $)...

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Total Assets (million $) 14.00 Debt Ratio Amount of Debt Interest Rate Interest Amount of Equity 0% - - - 14.00 10% 1.40 9% 0.13 12.60 50% 7.00 11% 0.77 7.00 60% 8.40 14% 1.18 5.60 Case 1 : 0% Debt Ratio Probability EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) 0.2 4.20 - 4.20 1.68 0.5 2.80 - 2.80 1.12 0.3 0.70 - 0.70 0.28 Expected Value 2.45 - 2.45 0.98 Standard Deviation Coefficient of variation Case 2 : 10% Debt Ratio Probability EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) 0.2 4.20 0.13 4.07 1.63 0.5 2.80 0.13 2.67 1.07 0.3 0.70 0.13 0.57 0.23 Expected Value 2.45 0.13 2.32 0.93 Standard Deviation Coefficient of variation Case 3 : 50% Debt Ratio Probability EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) 0.2 4.20 0.77 3.43 1.37 0.5 2.80 0.77 2.03 0.81 0.3 0.70 0.77 (0.07) (0.03) Expected Value 2.45 0.77 1.68 0.67 Standard Deviation Coefficient of variation Case 4 : 50% Debt Ratio Probability EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) 0.2 4.20 1.18 3.02 1.21 0.5 2.80 1.18 1.62 0.65 0.3 0.70 1.18 (0.48) (0.19) Expected Value 2.45 1.18 1.27 0.51
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Standard Deviation Coefficient of variation
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Net Income ROE (million $) 2.52 18.00% 1.68 12.00% 0.42 3.00% 1.47 10.50% 7.55% 0.72 Net Income ROE (million $) 2.44 19.40% 1.60 12.73% 0.34 2.73% 1.39 11.07% 8.39% 0.76 Net Income ROE (million $) 2.06 29.40% 1.22 17.40% (0.04) -0.60% 1.01 14.40% 15.10% 1.05 Net Income ROE (million $) 1.81 32.40% 0.97 17.40% (0.29) -5.10% 0.76 13.65%
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18.87% 1.38
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Alternative I: Zero Debt Total Debt 952.50 Assets (in million $) 1,350.00 New Debt - Equity (in million $) 667.50 (This includes retained earnings & new capital) Shares Outstanding (million) - Existing 20.00 - New shares 4.50 ($270 million / $60 per share) Total 24.50 Existing Interest Liability - on Long term loans (million $) 30.00 - on short term loans (million $) 15.00 Total 45.00 Probability Sales EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) (million $) 0.30 2,250.00 225.00 45.00 180.00 72.00 0.40 2,700.00 270.00 45.00 225.00 90.00 0.30 3,150.00 315.00 45.00 270.00 108.00 Expected Value 2,700.00 270.00 45.00 225.00 90.00 Standard Deviation Alternative II: 100% Debt Total Debt Position - Existing Debt 952.50 - New Debt 270.00 Total Debt 1,222.50 Assets (in million $) 1,350.00 Equity (in million $) 397.50 (This includes retained earnings) Shares Outstanding (million) - Existing 20.00 - New shares - Total 20.00 Existing Interest Liability - on Long term loans (million $) 30.00 - on short term loans (million $) 15.00 - on new debt @ 12% 32.40 Total 77.40 Probability Sales EBIT Interest PBT Taxes (40%) (million $) (million $) (million $) (million $) (million $) 0.30 2,250.00 225.00 77.40 147.60 59.04 0.40 2,700.00 270.00 77.40 192.60 77.04 0.30 3,150.00 315.00 77.40 237.60 95.04 Expected Value 2,700.00 270.00 77.40 192.60 77.04 Standard Deviation
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Alternative II of 100% debt is more recommended as it increases the return on equity as well as the EPS fo
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This note was uploaded on 05/13/2010 for the course MECH 17657 taught by Professor Ravikant during the Spring '10 term at Indian Institute of Technology, Delhi.

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solution_replacement questions - Total Assets (million $)...

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