Академический Документы
Профессиональный Документы
Культура Документы
Probability
High risk
0
E(EBIT)
EBIT
13-3
13-4
Effect of operating
leverage
TC
Profit
TC
FC
FC
QBE
Sales
QBE
Sales
13-5
13-6
13-7
An example:
Illustrating effects of financial
leverage
Firm L
$10,000 of 12% debt
in assets
$20,000 in assets
rate 40% tax rate
13-8
Firm U: Unleveraged
Prob.
EBIT
Interest
EBT
Taxes (40%)
NI
Economy
Bad
Avg.
0.25
0.50
$2,000
$3,000
0
0
$2,000
$3,000
800
1,200
$1,200
$1,800
Good
0.25
$4,000
0
$4,000
1,600
$2,400
13-9
Firm L: Leveraged
Prob.*
EBIT*
Interest
EBT
Taxes (40%)
NI
Economy
Bad
Avg.
0.25
0.50
$2,000
$3,000
1,200
1,200
$ 800
$1,800
320
720
$ 480
$1,080
Good
0.25
$4,000
1,200
$2,800
1,120
$1,680
ROE
TIE
6.0%
FIRM L
ROE
TIE
4.8%
1.67x
9.0%
12.0%
10.8%
2.50x
16.8%
3.30x
13-11
EBIT X (1 T)
V=
WACC
Where,
13-13
Cost of equity
Cost of Debt
Annual Cost (%)
WACC
Minimizes WACC.
Maximizes EPS.
13-15
E/A
ratio
ks
kd (1 T) WACC
12.00%
87.50
12.51
4.80
11.55
75.00
13.20
5.40
11.25
62.50
14.16
6.90
11.44
50.00
15.60
8.40
12.00