Optimal Capital Structure with Hamada
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero-growth firm and pays out all of its earnings as dividends. The firm's EBIT is $15 million, and it faces a 25% federal-plus-state tax rate. The market risk premium is 6%, and the risk-free rate is 7%. BEA is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 11%. BEA has a beta of 0.8.
Beta:
Cost of equity: %
%
What is the total value of the firm with 40% debt? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places.
$ million
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Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $15.729 million, and it faces a 30% federal-plus-state tax rate. The market risk premium is 4%, and the...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8 % , and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $13.261 million, and it faces a 40 % federal-plus-state tax rate. The market risk premium is...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $12.168 million, and it faces a 35% federal-plus-state tax rate. The market risk premium is 6%, and the...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $15.621 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 6%, and the...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $13.565 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 6%, and the...
Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) Is considering a change in its capital structure. BEA currenty has $20 million in d bt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is s 12.615 million, and it faces a 40% federal plus state tax rate. The market risk premium...
5. Problem 15-10 Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $13.568 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is...
Problem 15-10 Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $12.168 million, and it faces a 30% federal-plus-state tax rate. The market risk premium is 5%,...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $14.070 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 4%, and the risk-free rate is 5%. BEA...
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $12.087 million, and it faces a 40% federal-plus-state tax rate. The market risk premium is 5%, and the risk-free rate is 5%. BEA...