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    Exercises

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    Cristian Joel Vasquez Alava

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    © All Rights Reserved
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    Exercises

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    Cristian Joel Vasquez Alava
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    Copy of Exercises

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    2 views8 pages

    Exercises

    Uploaded by

    Cristian Joel Vasquez Alava

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Debt ratio 10% Debt ratio 30%

    EBIT $20,000.00 $85,000.00 $110,000.00 $20,000.00


    Interest $26,400.00 $26,400.00 $26,400.00 $6,050.00
    Net profit before tax -$6,400.00 $58,600.00 $83,600.00 $13,950.00
    0.4 Taxes -$2,560.00 $23,440.00 $33,440.00 $5,580.00
    Net profit after tax -$3,840.00 $35,160.00 $50,160.00 $8,370.00
    6,600 EPS -$0.58 $5.33 $7.60 $0.85
    Expected EPS $5.33

    1) The best debt ratio to maximize the EPS is 50%


    0.25 0.5 0.25
    debt ratio pessimistic most likely opptimistic
    10% income $100,000 $200,000 $250,000
    30% fc $50,000 $50,000 $50,000
    50% vc $50,000 $100,000 $125,000
    ebit $0 $50,000 $75,000
    Shares of Interest rate of
    Debt ratio Total assets debt equity common stock debt
    40.00% $550,000 $220,000 $330,000 6,600 12.00%
    10.00% $550,000 $55,000 $495,000 9,900 11.00%
    50.00% $550,000 $275,000 $275,000 5,500 16.00%
    60.00% $550,000 $330,000 $220,000 4,400 20.00%

    0.4 9,900 0.4 5,500


    Debt ratio 30% Debt ratio 50% Debt ratio 60%
    $85,000.00 $110,000.00 $20,000.00 $85,000.00 $110,000.00 $20,000.00
    $6,050.00 $6,050.00 $44,000.00 $44,000.00 $44,000.00 $66,000.00
    $78,950.00 $103,950.00 -$24,000.00 $41,000.00 $66,000.00 -$46,000.00
    $31,580.00 $41,580.00 -$9,600.00 $16,400.00 $26,400.00 -$18,400.00
    $47,370.00 $62,370.00 -$14,400.00 $24,600.00 $39,600.00 -$27,600.00
    $4.78 $6.30 -$2.62 $4.47 $7.20 -$6.27
    $4.78 $4.47
    deviation and coefficient of
    variation
    Interest Pessimistic Most Likely EOptimistic EPStandar Dev. Coeff. Variati
    $26,400.00 2.50 3.50 4.80 0.82 0.23
    $6,050.00 3.00 4.00 5.20 0.78 0.20
    $44,000.00 3.50 4.60 5.50 0.71 0.15
    $66,000.00 4.30 5.20 6.10 0.64 0.12

    0.4 4,400
    Debt ratio 60%
    $85,000.00 $110,000.00
    $66,000.00 $66,000.00
    $19,000.00 $44,000.00
    $7,600.00 $17,600.00
    $11,400.00 $26,400.00
    $2.59 $6.00
    $2.59
    3) Calculate the vale of the share
    Expected ReturnValue of Share
    13 0.27
    15.00% 26.67 The best debt ratio to maximize the price of the share is 30%
    16.00% 28.75
    19.00% 27.37
    f the share is 30%
    620000
    30% dr
    int
    structure debt earnings per
    ratio share
    0% 3.12 €
    10% 3.90 €
    20% 4.80 €
    30% 5.44 €
    40% 5.51 €
    50% 5.00 €
    60% 4.40 €

    With the maximization of expected earning


    40% of the capital structure debt ratio, and
    maximization of share value is 30% of capi
    debt ratio
    Required Estimated
    return share value
    13% 24.00 €
    15% 26.00 €
    16% 30.00 €
    17% 32.00 €
    19% 29.00 €
    20% 25.00 €
    22% 20.00 €

    ation of expected earnings per share is


    l structure debt ratio, and the
    hare value is 30% of capital structure

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