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?
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
Section: Chapter Questions
Problem 1PS
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Question
Capital Structure. Here is a simplified
|
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?
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