Vous êtes sur la page 1sur 4

1)

EBIT =40,000 R0=11.2 R B =5 t c =30


V u=

EBIT ( 1t c )
R0

28,000
=250,000
0.112

V L =V u +t c B=250,000+ ( 0.3100,000 )=280,000

A) Yes, I would recommend that company A goes ahead with the restructuring;
by restructuring, the company is able to increase the value by

V L V U =30,000
B)

V L '=V u +t c BPV ( CFD ) =250,000+ ( 0.3100,000 )26,500=253,500


V 'L =253,500>250,000=V u From the above equation

V 'L

, the value of

company taking into account the cost financial distress PV ( CFD ) , is still
greater than

V u . I would therefore still recommend that the firm perform

the restructuring as the firms PV increases by 3,500


C) According to Efficient Market Hypothesis, the firms value increases by 3,500
as soon as it is announced. The firm value is 253,500. The number of shares
are 10,000. Price per share is 25.35
The number of shares that can be repurchased is equal to
The outstanding shares is equal to

10,0003944.78=6055.22

2)
A) Scenario with dividends.

stock price after dividend=201=19


Wealth of shareholder = 19 + 1 = 20

EPS=

Earnings 2000
=
=2
Shares
1000

P 19
= =9.5
E 2
Scenario with Repurchase

Number of shares repurchase=

100,000
=3944.78
25.35

1000
=50
20

New EPS EP S' =

2000 40
= 2.1052632
950 19

P 20 19
= = =9.5
E 40 2
19
P/E ratio under both scenarios is identical and equal to 9.5
B) A share repurchase gives more flexibility to the shareholders, allowing
shareholders who desire to sell their share to do so. The dividend option may
not be as desirable, as it would be taxed at the top marginal rate at a point in
time the shareholder has no control over.

3)

B
=0.56 R s=0.12 RB =0.04 t c =0.4
S
EBIT ( millions )=22.20.4=8.88
EAT ( millions )=8.88( 1t C ) =8.88(10.4 )=5.328
A)

Rwacc =

S
B
1
0.56
Rs+
R B ( 1t c )=
0.12+
0.040.6=0.085538
S+ B
S+ B
1.56
1.56

UCF=EAT =5.328
V L=

B)

UCF
5.328
=
=62.287 ( millions)
R wacc 0.085538

UCF=LCF + ( 1t C ) R B B=LCF + ( 1t C )
V
( 0.56
1.56 )

5.328=LCF + 0.60.04
LCF=5.328

R BB
V
S+ B L

0.60.040.56
62.287=4.791373538( millions)
1.56

Value of equity=

LCF 4.791374538
=
=39.92811282( millions)
Rs
0.12

C) The two valuations methods can be used to obtain the same results, although
the procedures are quite different.
For WACC method, we find the cash flows of the unlevered (all-equity) firm
and discount those cash flows using

Rwacc . On the other hand for FTE

method we find the value of the Levered cash flows and discount them using

Rs . To show the results are the same if the value of debt, which is
22.3594359 in millions is added to the value of equity calculated above in
part B we obtain the same value of 62.287 (in millions).

Value of debt=

62.287=22.3594359 ( millions )
( 0.56
1.56 )

Value of debt +Value of equity ( part B ) =62.287 ( 3 decimal places )=asnwer for part A=Valueusing wac

4)

EAT =EBIT ( 1t c )=450,000( 10.35 )=292,500


UCF=EAT preferred divdend=292,50045,000=247,500
Debt
ratio

Cost of
Debt
after tax

c
1t
RB

Require
d return

Rs

WACC
Formula for calculating WACC used
below

B
S
Rwacc = R B ( 1t c ) + R s
V
V

0%

0.00

0.120

Rwacc =00+10.12=0.12

20%

0.0325

0.121

Rwacc =0.20.0325+ 0.80.121=0.1033

40%

0.065

0.128

Rwacc =0.40.065+0.60.128=0.1028

60%

0.0975

0.135

Rwacc =0.60.0975+0.40.135=0.1125

Rwacc

UCF / R wacc

0.12
0.1033
0.1028
0.1125

2062500.00
2395934.17
2407587.55
2200000.00

The Debt ratio that maximizes value is a debt ratio of 40%. Id therefore recommend
the company use a debt ratio of 40% if they are interested in maximizing value.