15-1. Fix Cost: $ 500.

000

Variable Cost: $ 3

Sales price: $ 4

BEP units

500.000
BEP units 43
= 500.000

15-2. Optimal capital structure can be achieved by Armadas when Debt Ratio 0,3 or 30%

We can look in page number 521 that in last paragraph. We can read the first sentence that
stated, Finally and very importantly recall that the capital structure that minimizes the WACC is also
the capital structure that maximizes the firms stock pricing.

15-3. Average on the EPS on firms excluding the probability because the probability give the same
chance for every firms.

a. $ 5,10
b.
Stock Standard Low High Standard Deviasi/EPS Number of
Price deviation riskness
5,10 3,61 1,49 8,71 70,78% 2
4,20 2,96 1,24 7,16 70,4% 3
5,10 4,11 0,99 9,21 80,58% 1

15-4. Asset $ 10 Million Unlevered : = bL/[1 + ( 1 T) (D/E)]

Debt $ 2 Million

` Equity $ 8 Million

: 1,2

Tax: 40%
1,2
Unlevered : 1+(0,6 0,25)

15-5 MAAKL and Pacific dana 20 Million Invested capital

EBIT: $ 4 Million
 Tax: 40%

Debt to capital ratio Pacific dana 50% with 12% of interest rate

Debt to capital ratio MAAKL 30% with 10% of interest rate

(1 (%))
ROIC:

a. ROIC Pacific: 4 (1-0,4) / 0,5 = 4,8

ROIC MAAKL: 4 (1-0,4) / 0,7 = 3,43

b.
ROE Pacific ROE Pacific

Earnings Berfore Tax: Earnings Berfore Tax:

4 (12% x (50% x invested capital)) 4 (10% x (30% x invested capital))

4 (12% x $ 10 Million) = $ 2,8 Million 4 (10% x $ 6 Million) = $ 3,4 Million

Earnings: $ 2,8 Million x (1-T) Earnings: $ 3,4 Million x (1-T)

$ 2,8 Million x (1-40%) = $ 1,68 Milliom $ 3,4 Million x (1-40%) = $ 2,04 Million ROE:
ROE: $ 1,68 Milliom/$ 10 Million = 16,8 % $ 2,04 Milliom/$ 14 Million = 14,57 %
16-1. Equity: 30%

Debt: 70%

Capital Budgeting: $ 3.000.000

Net Income: $ 2.000.000

Dividen residual model : Net Income (Target equity ratio x capital budgeting)

: $ 2.000.000 (0,3 x $ 3.000.000)

: $ 1.100.000

$ 1.100.000
DPR: : $ 2.000.000
= 0,55

16-2. Stock split 3-for-2

Price per share before stock split $ 90

$ 90 2
New price 3
= $ 60

16-3. Net Income: $ 2.000.000

Shares Outstanding: 1.000.000 shares

Purchase 20% at market

Current EPS: $ 2.000.000 / 1.000.000 = $ 2/Share

EPS after stock buyback: $ 2.000.000 / 800.000 = $ 2,5/Share

16-4. Stock split 5-for-1

Current dividen $ 0,75/Share increased 9% from last dividen

Current dividen if not stock split per share: 5 x $ 0,75 = $ 3,75

Last dividen: $ 3,75/ (1 + dividen growth)

$ 3,75/ 1,09 = $ 3,44

16-5. Need investment for $ 10 Million and 40% from Debt

Dividen 45%

Net Income: $ 5 Million

How much external financing needed?

Financing from equity: $ 10 Million x (1-Debt ratio)

$ 10 Million x (1-0,4)

$ 10 Million x 0,6 = $ 6 Million

Dividen reinvestment: $ 5 Million x (1-DPR)

$ 5 Million x 1-0,45

$ 5 Million x 0,55 = $ 2,75 Million

External financing: $ 6 Million - $ 2,75 Millon = $ 3,25 Million

16-6.

Project Cost of Capital IRR Net Income

Project High 16% 20% 20% x $ 5.000.000 = $ 1.000.000
Project Medium 12% 10% Inappropriate (IRR<Cost of Capital)
Project Low 8% 9% 9% x $ 5.000.000 = $ 450.000

Company Capital Structure 50% Debt and 50% Equity

Expected Net Income: $ 7.287.500 Realized Net Income: $ 1.450.000

Payout ratio : $ 1.450.000 (0,5 x $ 7.287.500)

: $ 1.450.000 - $ 3.643.750

: ($ 2.193.750)

The Company pay no dividen to the shareholders because residual dividen model show negative value
which means there is insufficient money for pay dividen, and all Net Income will allocate to
reinvestment.
17-1 Sales: $ 15 Million

Inventories: $ 2 Million

Receivable: $ 3 Million

Payable: $ 1 Million

COGS: 80% of Sales

Working Capital: 8%

CCC:

$ 3 Million/ ($ 15 Million/365) + $ 2 Million/ ($ 12 Million/365) - $ 1 Million/ ($ 12Million/365):

73 + 60,83 30,42 (uprounding)

73 + 61 31 = 103 Days.

New CCC:

$ 2,7 Million/ ($ 15 Million/365) + $ 1,8 Million/ ($ 12 Million/365) - $ 1,1 Million/ ($ 12Million/365)

65,7 + 54,75 33,45 (uprounding)

66 + 55 34 = 87 Days.

Interest given:

$ 1 Million x 8% x (103/365) = $ 22.575

After change in inventories, receivables and payables

$ 1 Million x 8% x (87/365) = $ 19.068

Company profit will increase $ 3.507 due to decrease in interest expense.

17-2 Sales: $ 10 Million

Receivable: $ 2 Million

Average Collection Periode: 30 Days

Current DSO: $ 2 Million/ ($ 10 Million/ 365)


DSO: /365

30= $ 10 /365

30 x $ 10 Million = a x 365

a = (30x$ 10 Million) / 365

a = $ 821.917

Capital release: $ 2.000.000 - $ 821.917 = $ 1.178.083

17-3. Debt: $ 8 Million 3/5 net 60

Nominal annual interest:

Nominal annual interest: (3/97) x (365/(60-5))

3,093% x 6,637 = 20,52%

Effective annual interest:

Effective annual interest: (1 + 0,03093)6,637 - 1 = 22,40%

0,1 60
Interest if use bank loan: $ 8 Million x (1 + )
365

$ 8 Million x 1,016 = $ 8.132.575

Interest: 1,016 1= 1,6%

17-4. Inventory Collection Periode: 75 Days

Average Collection Periode: 38 Days

Payable Defferal Periode: 30 Days

CCC: 75 + 38 - 30 = 83

Sales per day: $ 3.421.875/365 = $ 9375

$ 3.421.875
365
x 38 = $ 356.250

ICP: 75% $ 9375

ICP: $ 7.031,25

Inventory: 75 x $ 7.031,25 = $ 527.343,75

Inventory turnover: COGS/Inventory

Inventory turnover: ($ 3.421.875 x 75%)/ $ 527.343,75

Inventory turnover: $ 2.566.406,25/ $ 527.343,75 = 4,867

Or

Inventory turnover: day in a year/ICP

Inventory turnover: 365/75 = 4,867