Homework Answers
A) Optimal Debt level:
Cost of equity at each level of Debt:
| wd | D/E |  levered
=
unlevered[1+ (D/E)(1-T)] |
rs = rf +
( rmarket risk premium) |
| 0% | 0 | 1.25 | 13.5 |
| 20% | 0.25 | 1.4375 | 15 |
| 30% | 0.43 | 1.5725 | 15.58 |
| 40% | 0.67 | 1.7525 | 17.02 |
| 50% | 1 | 0.75 | 9 |
B) FCFF = EBIT (1 - tc) + Depreciation - Capital expenditures - Increase in NWC
FCFF = 1500 x 0.60 + 375 = 1275
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balance sheet and net sales on the income statement for your
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Consolidated Balance Sheets (USD $) In Millions, unless o Feb. 01,2015 Vertical AnalysisFeb. 01,2014Vertical AnalysisHorizontal Analysis therwises fied Current Assets: Cash and Cash Equivalents Receivables, net Merchandise Inventories Other Current Assets Total Current Assets $1.723 1484 11079 1016 15302 38.513 $1929 1.398 11,057 895 15,279 39,064 at...
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