Pinder Inc. in the U.S. is examining its capital structure, with the

Pinder Inc. in the U.S. is examining its capital structure, with the intent of arriving at an optimal debtratio. It currently has no debt and has abeta of 1.5. The riskless interest rate and the market risk premiumare is 9% and 5.5%, respectively. Your research indicates that the debt rating will be as follows atdifferent debt levels: D/(D+E) Rating Interest rate0% AAA 10%10% AA 10.5%20% A 1 1%30% BBB 12%40% BB 1 3%50% B 14%60% CCC 16%70% CC 18%80% C 20%90% D 25% The firm currently has 1 million shares outstanding at $20 per share. Assume corporate tax rate for thisfirm is 40%. (a) What is the firm‘s optimal debt ratio (only consider the above 10 choices fiom 0% to 90%). Pleaseuse the cost of capital approach in which you need to check how the cost of debt (using the debt ratingabove) and the cost of equity (using the equation for levered beta) would change at each debt ratio. (b) What is the current market value of the firm? After the firm restructures its financial structure at theoptimal debt level you calculated in (a), what will be the value of the firm? Assume that the firm’sassets are expected to generate a constant annual cash flow forever, which will not be affected byfinancing policy.

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more