Tài liệu bài tập thưc hành môn Tài chính doanh nghiệp_ Chapter 15 | Chapter 15 Capital Structure Basic Concepts a. Since Alpha Corporation is an all-equity firm its value is equal to the market value of its outstanding shares. Alpha has 5 000 shares of common stock outstanding worth 20 per share. Therefore the value of Alpha Corporation is 100 000 5 000 shares 20 per share . b. Modigliani-Miller Proposition I states that in the absence of taxes the value of a levered firm equals the value of an otherwise identical unlevered firm. Since Beta Corporation is identical to Alpha Corporation in every way except its capital structure and neither firm pays taxes the value of the two firms should be equal. Modigliani-Miller Proposition I No Taxes VL Vu Alpha Corporation an unlevered firm is worth 100 000 Vu . Therefore the value of Beta Corporation VL is 100 000. c. The value of a levered firm equals the market value of its debt plus the market value of its equity. Vl B S The value of Beta Corporation is 100 000 VL and the market value of the firm s debt is 25 000 B . The value of Beta s equity is S VL - B 100 000 - 25 000 75 000 Therefore the market value of Beta Corporation s equity S is 75 000. d. Since the market value of Alpha Corporation s equity is 100 000 it will cost 20 000 100 000 to purchase 20 of the firm s equity. Since the market value of Beta Corporation s equity is 75 000 it will cost 15 000 75 000 to purchase 20 of the firm s equity. e. Since Alpha Corporation expects to earn 350 000 this year and owes no interest payments the dollar return to an investor who owns 20 of the firm s equity is expected to be 70 000 350 000 over the next year. While Beta Corporation also expects to earn 350 000 before interest this year it must pay 12 interest on its debt. Since the market value of Beta s debt at the beginning of the year is 25 000 Beta must pay 3 000 25 000 in interest at the end of the year. Therefore the amount of the firm s earnings available to equity holders is 347 000 350 000 - 3 000 . The dollar
