BA103-F04-class20-21-capitalstructure

BA103-F04-class20-21-capitalstructure - CAPITAL STRUCTURE...

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Unformatted text preview: CAPITAL STRUCTURE This worksheet contains examples that you should use at your own risk. You can try different capital structures like the ones we used in class. Notice, to solve for D/(D+E) the computer must solve a "circular reference" This example considers a firm that has an operating profit (EBIT) of $1,000 per year. The firm pays out any and all profits as dividends at the end of each year (no reinvestment). The firm can issue riskless debt (an assumption that just makes the example easier at this point.) again, you should change the green cells (found on the first two worksheets only) directions: 1 Go to "Tools" "Options" 2 Hit the "Calculation" tab 3 Click the "Interation" box about half way down 4 Make sure you have about 100 iterations Market Value of the Firm (Modigliani & Miller Proposition 1) EBIT 1,000.0 asset beta 0.6 rf 8.00% rm-rf 7.00% rA 12.20% tax rate 0.00% <-- no taxes Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7 Scenario 8 rd 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% re Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 MV(E) Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 MV(D) 0.0 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 6,500.0 MV(F) Err:522 Err:522 Err:522 Err:522 Err:522...
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This note was uploaded on 12/06/2011 for the course UGBA 103 taught by Professor Berk during the Fall '07 term at University of California, Berkeley.

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BA103-F04-class20-21-capitalstructure - CAPITAL STRUCTURE...

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