Weight of debt = 30%
Weight of equity = 100% - 30% = 70%
Value of equity after recap = Value of firm - weight of
equity
= $500 million * 70%
= $350 million.
Value of equity after recap = $350 million
Note: As per HOMEWORKLIB RULES, only first question can be answered. Post the rest of the questions separately.
DATA | ||
Value of Firm | 500 million | |
Debt | 40% | |
Equity | 60% | |
Solution: | ||
Value of equity = total market value - value of debt | ||
Value of Equity = [Debt / wD] - Value of Debt | ||
Value of EQUITY = ( 200/ 0.4) - 200 | ||
value of Equity = 500 - 200 | ||
Value of Equity = 300 | ||
Value of equity after recap = Value of firm * weight of equity | ||
Value of equity after recap = 500 Million * 60% | ||
Value of Equity After Recap = 300 |
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