стр. 151 
=
S+B $68,800,000+ $20,000,000 = $88,800,000
V = =
Therefore,
(2) The firmвЂ™s market debuequity ratio is:
B $20,000,000
= 29%
=
S $68,800,000
I = $30,000,000X 7%
$2,100,000
=
EAC = EBIT  I = $10,000,000 $2,10O,OOO = $7,900,000
V = S+B $63,200,000+ $30,000,000 = $93,200,000
=
319
LEVERAGE AND CAPITAL STRUCTURE
CHAP. 111
Therefore,
(2) The debtlequity ratio is:
The NO1 Approach. Assume the same data as given in Problem 11.4. (a) Using the net operating
11.5
income (NOI) approach and an overall cost of capital of 12 percent; (1) compute the total value,
the stock market value of the firm, and the cost of equity; and (2) determine the firmвЂ™s market
debt/equity ratio. ( b )Determine the answer to ( a )if the company were to sell the additional $10
million in debt, as in Problem 11,4(b).
SOLUTION
EBIT = $10,000,000
(4
k, = 12%
EAC = $8,600,000
$83,330,000  $20,000,000 = $63,330,000
S = V B =
Therefore,
k e = EAC
= $8,600,000 = 13.6yo
$63,330,000
S
(2) The debuequity ratio is:
$20,000,000
B
= 31.58%
=
S $63,330,000
S= VB $83,330,000 $30,000,000= $53,330,000
=
( b ) (1)
Therefore,
k e = EAC  $8,600,000 = 16.1%

$53,330,000
S
(2) The debuequity ratio is:
$307000˜000 56.3%
=
=
$53,330,000
S
The NI Approach. HappyDay Industries, Inc., is financed entirely with 100,000 shares of
11.6
common stock selling at $50 per share. The firmвЂ™s EBIT is expected to be $400,000.The firm pays
100 percent of its earnings as dividends. Ignore taxes.
( a )Using the NI approach, compute the total value of the firm and the cost of equity. ( b )The
company has decided to retire $1 million of common stock, replacing it with 9 percent longterm
debt. Compute the total value of the firm and the overall cost of capital after refinancing.
[CHAP 11
LEVERAGE AND CAPITAL STRUCTURE
320
SOLUTION
Since there is no debt, B = 0 and I = 0.
(a)
V  B = (100,000 shares X $50)  0 = $5,000,000
S =
EAC = EBIT  I = $400,000 0 = $400,000
Therefore,
k e = EAC $400,000
= = 8%
$5,000,000
S
which is also k,,.
I = $1,000,000 X 9% = $90,000
(b)
EAC = EBIT  I = $400,000  $90,000 = $310,000
S + B = $3,875,000+ $1,000,000 = $4,875,000
V =
Therefore,
EBIT $400,000
=
k, = = 8.2%
V $4,875,000
1.
17 The NO1 Approach. Assume the same data as given in Problem 11.6.( a ) Using the NO1 approach
and an overall cost of capital of 10 percent, compute the total value, the stock market value of
the firm, and the cost of equity. (6) Determine the answers to ( a ) if the company decided to retire
$1million of common stock, replacing it with 9 percent longterm debt.
SOLUTION
S = V  B = $4,000,000 $0 = $4,000,000
Therefore,
k e = EAC $400,000 = loyo
=
$4,000,000
стр. 151 