Business, 30.07.2019 19:10, cjasmine626

15-9). capital structure analysis - pettit printing company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. the company’s ebit is $13.24 million, and its tax rate is 15%. pettit can change its capital structure by either increasing its debt to 70% (based on market values) or decreasing it to 30%. if it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 12% coupon. if it decides to decrease its leverage, it will call its old bonds and replace them with new 8% coupon bonds. the company will sell or repurchase stock at the new equilibrium price to complete the capital structure change. the firm pays out all earnings as dividends; hence, its stock is a zero-growth stock. its current cost of equity, rsrs, is 14%. if it increases leverage, rsrs will be 16%. if it decreases leverage, rsrs will be 13%. what is the firm’s wacc and total corporate value under each capital structure?

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15-9). capital structure analysis - pettit printing company has a total market value of $100 million...