Since my answers are different from anything on here, I thought I would post. I may be wrong.
E=500M D=500M V=Capital=1000M r_D=.08 r_f=.05 r_m=.07 B(beta)=1 T=.35 Interest=40M Accounting Income=Net Income=75M
A) After-tax debt payment = after-tax interest = (1-T)Interest = (1-.35)40 = 26M
B) After-Tax debt payment + Net Income = 26 + 75 = 101M
C) WACC = r_D(1-T)(D/V) + r_E(E/V) r_E = r_f+B(r_m-r_f) r_E = .05+1(.07-.05) = .07 WACC = .08(1-.35)(500/1000) + .07(500/1000) WACC = .061 = 6.1%
D) EVA = (After-tax interest payment + net income) - (Cost of Capital(WACC) * Total Capital) = (26 + 75) - (.061 * 1000) EVA = 40M
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