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Unformatted text preview: 3. Salvage value = Sale price (Sale price book value) x T% C. Stock structure 1. Operation leverage breakeven: P x Q = VC x Q + FC EBIT = NI= P x Q (VC x Q + FC) = 0 Q = FV/(P VC) 2. EPS = [(Sales FC VC In/ex)(1 T%)]/#Shares 3. Hamada equation L= U [1 + D/E(1 T%)], r s = r RF + (RP M ) L U = L /[1 + D/E(1 T%)] 4. Debt rate MAX EPS > Debt rate MIN WACC = Debt rate MAX PRICE...
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 Spring '08
 Bulmash
 Debt, Interest

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