| plan | A | B | C | D | |
| Debt/equity | 2.33 | 1.86 | 1.22 | 0.82 | |
| Kd(after-tax) | 8.5% | 6.2% | 4.4% | 3.9% | |
| Ke | 16.0% | 13.5% | 11.2% | 10.9% | |
| Expected EPS | $6.00 | $6.33 | $5.47 | $4.89 | |
| wd | (2.33/(2.33+1)) | (1.86/(1.86+1)) | (1.22/(1.22+1)) | (0.82/(0.82+1)) | |
| we | (1/(2.33+1)) | (1/(1.86+1)) | (1/(1.22+1)) | (1/(0.82+1)) | |
| WACC | 10.75% (*1) | 8.75% (*2) | 7.46% (*3) | 7.75% (*4) |
(*2) (1.86/(1.86+1))*6.2% + (1/(1.86+1))*13.5% = 8.75%
(*3) (1.22/(1.22+1))*4.4% + (1/(1.22+1))*11.2% = 7.46%
(*4) (0.82/(0.82+1))*3.9% + (1/(0.82+1))*10.9% = 7.75%
The plan with the lowest WACC maximizes the firm's stock price and thus reflects the optimal capital structure.
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