Chapter_16

# Chapter_16 - Chapter 16 Problems 1-10 Input boxes in tan...

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Chapter 16 Problems 1-10 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak and "Solver Add-In."

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Chapter 16 Question 1 Input Area: EBIT \$750,000 Unlevered cost of equity 15% Corporate tax rate 35% Market value of debt \$1,500,000 Output Area: a. \$3,775,000.00 b. The CFO may be correct. The value calculated in part a does not include the costs of any non-marketed claims, such as bankruptcy or agency costs. V L

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Chapter 16 Question 2 Input Area: Current company value \$3,000,000 EBIT (40 hour week) \$500,000 EBIT (50 hour week) \$600,000 New capital \$2,000,000 Interest rate on debt 9% Output Area: a. Debt issue: Cash flow Interest Cash flow to equity Cash flow to Tom 40 hour week \$500,000 \$180,000 \$320,000 \$320,000 50 hour week \$600,000 \$180,000 \$420,000 \$420,000 Equity issue: Tom's equity ownership 60% Cash flow Interest Cash flow to equity Cash flow to Tom 40 hour week \$500,000 \$- \$500,000 \$300,000 50 hour week \$600,000 \$- \$600,000 \$360,000
Chapter 16 Question 3 Input Area: Amount of debt \$80,000 Debt interest rate 12% EBIT \$9,600 b. Growth rate 5% c. Growth rate 10% Output Area: a. Interest payment \$9,600.00 Earnings available to

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## Chapter_16 - Chapter 16 Problems 1-10 Input boxes in tan...

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