Answered You can hire a professional tutor to get the answer.
Principles of Finance Erwan Morellec Assignment 8 Instructions Assignments should be done in groups of 2 to 3 students. You should remain with the...
At the end of your master program you are hired by an investment bank. Your boss
asks you to evaluate a firm using the DCF approach with the WACC. The historical
market risk premium is 7.5%. The risk-free interest rate is 4%. The drop in EBIT is to
apply to the EBIT the firm would have had without debt. If for example EBIT is 100
without debt, a firm with a leverage ratio between 40% and 45% would have an EBIT
reduced by 13% that is EBIT = 87.
Your assignment is the following.
(a) Estimate the value of the firm if it sticks to the current capital structure.
(b) Determine the value-maximizing capital structure.
You have the following information. (all tables are attached)
