MGFD70H3 Lecture Notes - Lecture 13: Net Present Value, Cash Flow, Capital Structure
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Answer 1: s = * 2,000,000 = ,000,000 r. B = * 111. 47% * 100,000 = ,470,000 r. V = s + b + p =,000,000 + 111,470,000 + 70,000,000 = ,470,000. Lend ,000 @ 7% and invest ,000 in junyung shares. She is expecting 15% rate of return: sell shares of asher limited; nets ,000. When there are no taxes, cost of capital for the firm remains unaffected. Changes in capital structure result in no change in the firm value. Vl = b + s = ,000,000 + 300,000,000 = ,000,000. Vl after the announcement = 750,000,000 0. 4(100,000,000) = ,000,000. Need to issue = ,000,000/ = 3,846,153. 85 shares. Total number of shares = 10,000,000 + 3,846,153. 85 = 13,846,153. 85. 100, 000, 000 0. 07(350, 000, 000) 1 0. 40. Npvfsubsidized loan = amount borrowed pv of after tax interest payments pv of loan repayment. Apv = 0 = -0. 657239i + 544,622 + 337,954 = -0. 657239i +882,576.
