This is an M&M world with corporate taxes. Sci-fi is originally all equity financed (unlevered). All earnings are paid out as dividends, and the growth rate is zero. The firm decides to issue $8,000,000 in debt at 6% and to use the proceeds to repurchase stock. The capital structure change is permanent (so debt is perpetual). Fill in all of the missing information in the table below.
|
|
Unlevered
|
Levered
|
|
EBIT
|
7,500,000
|
7,500,000
|
|
INTEREST
|
|
|
|
EBT
|
|
|
|
Taxes (40%)
|
|
|
|
Net Income
|
|
|
|
#Shares
|
1,000,000
|
|
|
EPS
|
|
|
|
Unlevered return
|
10%
|
10%
|
|
Return on Equity rS
|
|
|
|
Price
|
|
|
|
Firm Value (V)
|
|
|
|
WACC
|
|
|