Capital Structure. Here is a simplified balance sheet for Epicure Pizza (figures in $ millions): Assets       Liabilities and Shareholders’ Equity Current assets   $80   Current liabilities $60 Fixed assets   125   Long-term debt 65         Equity 80 Total   $205   Total $205 Note: There are 16 million shares outstanding. Epicure shares are currently priced at $12 each. (LO13-3) You wish to calculate Epicure’s WACC. What is the relevant figure for the company’s debt ratio? You now realize that since Epicure issued its debt, interest rates have fallen substantially. Do you need to revise your measure of the debt ratio upward or downward?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Capital Structure. Here is a simplified balance sheet for Epicure Pizza (figures in $ millions):

Assets

 

 

 

Liabilities and Shareholders’ Equity

Current assets

 

$80

 

Current liabilities

$60

Fixed assets

 

125

 

Long-term debt

65

 

 

 

 

Equity

80

Total

 

$205

 

Total

$205

Note: There are 16 million shares outstanding.
Epicure shares are currently priced at $12 each. (LO13-3)

  1. You wish to calculate Epicure’s WACC. What is the relevant figure for the company’s debt ratio?
  2. You now realize that since Epicure issued its debt, interest rates have fallen substantially. Do you need to revise your measure of the debt ratio upward or downward?
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