fm16 20 - d = 20%, the dollar value of debt is: d = w d V =...

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Mini Case: 16 - 20 i. Describe the recapitalization process and apply it to PizzaPalace. Calculate the resulting the value of the debt that will be issued, the resulting market value of equity, the price per share, the number of shares repurchased, and the remaining shares. Considering only the capital structures under analysis, what is PizzaPalace’s optimal capital structure? Answer: First, find the dollar value of debt. For example, for w
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Unformatted text preview: d = 20%, the dollar value of debt is: d = w d V = 0.2 ($2,659,574) = $531,915. We can then find the dollar value of equity: S = V D S = $2,659,574 - $531,915 = $2,127,659. We repeat this process for all the capital structures. w d Debt, D 0% $ 0 20% $ 531,915 30% $ 817,439 40% $1,086,957 50% $1,315,789 Note: these are rounded; see FM12 Ch 16 mini case.xls for full calculations....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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