write my assignment 3693

At the end of your master program you are hired by an investment bank. Your boss

asks you to evaluate a firm using the DCF approach with the WACC. The historical

market risk premium is 7.5%. The risk-free interest rate is 4%. The drop in EBIT is to

apply to the EBIT the firm would have had without debt. If for example EBIT is 100

without debt, a firm with a leverage ratio between 40% and 45% would have an EBIT

reduced by 13% that is EBIT = 87.

Your assignment is the following.

(a) Estimate the value of the firm if it sticks to the current capital structure. 

(b) Determine the value-maximizing capital structure. 

You have the following information. (all tables are attached)