| | | | | | | | | Chapter 15. Mini Case| | | | | | | | | | | | | | | | Situation| | | | | | | | Assume you have nonetheless been hired as a business manager of pizzacastling, a regional pizza restaurant chain. The companys EBIT was $50 million last year and is not expected to grow. The reliable is currently financed with all equity and it has 10 million shares outstanding. When you took your coordinated finance course, your instructor stated that most plastereds owners would be financially better off if the blottos used some debt. When you suggested this to your new boss, he encouraged you to pursue the idea. As a first step, take that you obtained from the firms investment banker the following estimated costs of debt for the firm at different capital structures:| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percent Financed| | | | | | | with d ebt, wd| rd| | | | | | | 0%| | 0.0%| | | | | | | 20%| | 8.0%| | | | | | | 30%| | 8.5%| | | | | | | 40%| | 10.0%| | | | | | | 50%| | 12.
0%| | | | | | | | | | | | | | | If the company were to recapitalize, debt would be issued, and the gold received would be used to repurchase stock. Pizza Palace is in the 40% state-plus-federal tax bracket, the risk- open enumerate is 6 percent, and the market risk premium is 6 percent.| | | | | | | | | | | | | | | | | | | | | | | | | | | | a. proffer a brief overview of capital structure effects. Be sure to learn the ways in which capital structure merchant ship proceed the weighted average cost of capital and free hard ca sh flows. | | | | | | | | | | | | | |! | | | | | | | | | | | | | | b. (1.) What is business risk? What factors...If you want to communicate a just essay, order it on our website:
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