finance

**** **** **** ******* ** raise $30 million ** ******* ****** *** debt The investment bankers ***** ** your firm contact ********* investors *** **** **** **** the following ********** **** **** **** ** million coupons * **** *** $18 ******* maturity ***** ***** 10 years will sell for $20 ********* Equity **** **** expected ********* ** *** ******* ******** **** **** and growing ** * **** ** * percent *** **** ********** ***** *** *** *************** ************ *** **** ** **** ****** and the ********** ******** **** ************ review the following ************ **** ** ******* *** ****** of *********** ****** **** *** ********* *********** **** Cost ** **** ****** and ************ ** the ******* ***** Be **** to **** **** ************ in ***** *** ******* * ********* ******** ** ********** **** narrative ******** should summarize *** ******* of **** ******** *** **** *************** for *** ******* ** ******************* ** **** *** ** computed ***** **** ******** in ********* ** ***** ********* * ** pmt = 1 pv * *** fv * ** 0)= ******** ** ****** can be ********** using ****** ****** model shown ******* * D1 * ** * ****** of equityr = ** / P + ** ** / ** * 3%= 1500%WACC= ** * ** * ** * **** + ** * keHere ** * ****** ** debt * 20m / **** 67%and ****** of equity ** * *** * **** 33%kd - **** of **** = 417%cost ** ****** ** = ****** rate ***** ***** **** ** ** **** assume ** to ** *********** **** * *** * 417% * 33% x **** ************ 5Your **** has decided ** **** off ********* and *********** ** * ******** **** The owners ** *** *** firm **** ** ****** ******* *** **** ******* **** **** ******* ******* **** **** **** them ******* ** ** million a **** *** *** ******* ***** ** ***** ****** *** expected ****** ** *** ******* *** ********* payments *** *** ******** the **** buyers ******* *** firms could ******** **** price *** **** ***** * ******** **** ** * percent ****** ******* ******* expected dividends ** ** million ******** **** year 5 *** ******* ** * **** of * percent per **** ** ******* *********** They price the ****** ***** * discount **** of ** percent· **** ******* ******* **** **** pays **** ******* ** $1 ******* * **** and *** ******* ***** ** ***** ****** are ******** ****** ** *** ******* *** ********* ******** *** not ******** the **** buyers ******* *** firms ***** ******** They ***** *** **** using * ******** rate ** ** ******* ****** ******* receive ******** ********* of *** ******* ******** **** year 5 *** ******* ** * **** ** ** ******* *** **** ** ******* perpetuity) **** ***** *** ****** ***** * ******** **** of * *********** **** ******** *** *** ******** **** *** **** **** and equityPrepare * ******* Budgeting *** **** ** ******* ****** **** ******* the ********* Question 13Question ******** particular ******* ********* ****** ** ****** *** the *************** ******** your calculations ****** *** following ************ **** ** ******* *** ****** of *********** equity **** *** preferred *********** **** Capital ********* *** **** of Capital ****** to *** dropbox ********************** Budgeting:Step ** ********* the ***** ** Spinoff ***** ******* Structure 1The total ***** of ******* ***** ******* ********* * *** be ********** ** ************* Value of ******* * Present ***** of Debt * ******* Value of ************** ******* value ** all debt ******** ********* ********** can be ********** **** *** use ** PV function/formula of *************** Calculator *** **************** *** ** ** ***************** ***** Rate * ******** Rate ***** ******** ***** **** * ****** *** * ******* ***** ****** ******** *** ** * ****** Value (here **** Value)Here **** * ** **** * ** *** * ** *** ** * ******** ***** ****** in *** ***** **************** *** ** we getPresent Value ** Debt= *********** * ***** *************** ******* value ** ****** *** ** ********** **** *** *** of ********* formula:Present Value ** ****** * ******** **** 5/(1+Discount ******* * Dividend **** 5*(1+Growth Rate **** **** * ******************* **** * ****** ***************** ************* *** ****** ******** ** *** ******** ** *** ***** formula we ********** ***** of ****** * *********** * ************** - ************** = ***** *************** ** *** ********* the total ***** ** **** off ***** ******* ********* * ** below:Total ***** ** **** Off ******** Structure 1)= 4087 * 6418 ******* million_____Step ** ********* *** ***** of ******* ***** Capital Structure **** total ***** ** spinoff ***** ******* ********* * *** ***** ** ********** ** ************* ***** of Spinoff * ******* ***** ** Debt * ******* ***** ** Equity_____The present value ** all **** ******** ********* repayments *** ** ********** **** *** *** of ** **************** ** *************** ********** The **************** *** ** ** PV(RateNperPMTFV) where Rate * ******** **** ***** discount rate) **** = Period *** = ******* ***** ****** ******** and ** = ****** ***** ***** **** ********** **** * *** **** = ** *** * $1 and FV * ******** ***** ****** in *** ***** **************** *** ** ** ********** ***** of Debt= ** **** 20112) = $2024 *************** present ***** of ****** *** ** ********** **** *** *** of ********* formula:Present ***** of Equity * ******** **** 5/(1+Discount ******* * ******** Year *********** Rate from **** * ******************* **** * ****** ***************** ************* the ****** provided in *** question ** *** ***** ******* ** ********** ***** ** ****** * 39/(1+7%)^5 * *************** * ************** * ************** ** can calculate *** ***** value of **** off ***** ******* ********* * ** *********** ***** ** **** Off ******** ********* *** **** * 11901 **************** ** Capital:The question ** ****** ** *** ********** ** debt and ****** ** each ** the capital structure ********* we will take the current ****** ***** ** **** *** ****** ** *** calculation ** **** of capital *** **** ** ******* ** ********** ** ********** * ***** of *********** ** Debt * Value of Equity)*Cost of Debt + ***** ** Equity/(Value ** **** * ***** of Equity)*Cost of *********** the ****** calculated above we getWeighted Average Cost of Capital ******** ********* *** *************** * 6418/(10505)*75% =614%Weighted ******* **** ** ******* ******** Structure *** **************** * *************** =649%_____Conclusion:If *** **** ** **** ** **** *** *** **** and equity ** ****** ****** ******* structure 2 as it provides ahigher ***** ***** ** ********* *** ******* *** because there ** **** * ******** ********** ***** in the weighted ******* **** ** ******* of * ****************

Click here to download attached files: Solutions for Step-4 & 5.docx