Financial Management: Core Concepts, Third Edition

Advanced Problems for Spreadsheet Application

These problems are available in MyFinanceLab.

1. Break-even EBIT for different capital structures in a world of no taxes. Anthony Enterprises is looking at five different capital structures. Each structure uses an increasing amount of debt financing. The first structure is an all-equity structure whereby Anthony Enterprises will raise $40,000,000 by selling 10,000,000 shares of stock for $4 each. The next structure uses $5,000,000 of debt at a cost of 7.5% annually and reduces the number of shares outstanding to 8,750,000 shares. Each successive capital structure will add $5 million in debt and reduce the number of shares outstanding by 1,250,000 shares. In the final capital structure model, there ...