OP

Capital
Interest Interest Net
Structur Debt EBIT EBT Tax Rate Tax NOPAT
Rate Income
e

1 0.00% 40000 0.00% 0 40000 40.00% 16000 24000 24000

2 10.00% 40000 8.00% 3200 36800 40.00% 14720 22080 24000
3 20.00% 40000 8.00% 3200 36800 40.00% 14720 22080 24000
4 30.00% 40000 8.50% 3400 36600 40.00% 14640 21960 24000
5 40.00% 40000 9.00% 3600 36400 40.00% 14560 21840 24000
6 50.00% 40000 11.00% 4400 35600 40.00% 14240 21360 24000
7 60.00% 40000 14.00% 5600 34400 40.00% 13760 20640 24000
 OPTIMAL CAPITAL STRUCTURES
Earning
No of Repurchase Amount Kd*(1-T) Cost of Unlevere
per Wd Kd We
shares Shares of Debt Debt d Beta
share

10000 0 2.4 0.00% 0 0.00% 0.000 0.00% 100.00% 1

9030 970 2.445183 10.00% 20000 8.00% 0.048 0.48% 90.00% 1
8120 1880 2.719212 20.00% 40000 8.00% 0.048 0.96% 80.00% 1
7247.5 2752.5 3.03001 30.00% 60000 8.50% 0.051 1.53% 70.00% 1
6400 3600 3.4125 40.00% 80000 9.00% 0.054 2.16% 60.00% 1
5375 4625 3.973953 50.00% 100000 11.00% 0.066 3.30% 50.00% 1
4000 6000 5.16 60.00% 120000 14.00% 0.084 5.04% 40.00% 1
 No of
Market Ke Market share Market Market
Levered risk (through Cost of value
Rf WACC value before value
Beta Equity per
premium CAPM) Firm repurcha share Equity
se
1 6% 6% 12.00% 12.00% 12.00% 200000 10000 20 200000
1.066667 6% 6% 12.40% 11.16% 11.64% 206185.6 10000 20.61856 186185.6
1.15 6% 6% 12.90% 10.32% 11.28% 212766 10000 21.2766 172766
1.257143 6% 6% 13.54% 9.48% 11.01% 217983.7 10000 21.79837 157983.7
1.4 6% 6% 14.40% 8.64% 10.80% 222222.2 10000 22.22222 142222.2
1.6 6% 6% 15.60% 7.80% 11.10% 216216.2 10000 21.62162 116216.2
1.9 6% 6% 17.40% 6.96% 12.00% 200000 10000 20 80000