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0% Debt/ 25% Debt/ 50% Debt/ 60% debt/ 40% debt/ 0% debt/
100% Equity 75% Equity 50% Equity 40% equity 60% equity 100% equity
Book Value of Debt - 2,500 5,000 6,000 4,000 -
Book Value of Equity 10,000 7,500 5,000 4,000 6,000 10,000
0% Debt/ 25% Debt/ 50% Debt/ 60% debt/ 40% debt/ 0% debt/
100% Equity 75% Equity 50% Equity 40% equity 60% equity 100% equity
Value of equity plus value of debt 10,000.0 10,854.7 11,700.0 13,979.6 11,360.1 10,000.0
0% Debt/ 25% Debt/ 50% Debt/ 60% debt/ 40% debt/ 0% debt/
100% Equity 75% Equity 50% Equity 40% equity 60% equity 100% equity
6,041
1000
6.041
10,000
-
1000
10.00
5. In this set of problems, is leverage good for shareholders? Why? Is levering/unlevering the firm something that shareholders
themselves? In what sense should shareholders pay a premium for shares of levered companies?
Based on this case, the leverage not bring a good for shareholders. It shows that the number of value per share is decreasing.
be a negative impact to value for shareholder in their return. Shareholders cant do levering/unlevering for themselves. The firm
(Chief Finance Officer has responsibility on levering/unlevering. Based on this case, shareholders pay a discount for shares of l
debt decreased the value of the shares
irm something that shareholders can do for
es?
Before After
Recapitalization Recapitalization