PRELIMINARYSTUFFANDINPUTS

Objective
Beforeyoustart
Inputs
Units
Incomeinputs

BalanceSheet
MarketData

TaxRate
DefaultSpreads

READINGTHEOUTPUT
Summary

Details
References
CorporateFinance:TheoryandPractice,Chapter18
AppliedCorporateFinance:Chapter8

PRELIMINARYSTUFFANDINPUTS
Thisspreadsheetallowsyoutocomputetheoptimalcapitalstructureforanonfinancial
servicefirm
Openpreferencesinexcel,gointocalculationoptionsandputacheckintheiterationbox.
Ifitisalreadychecked,leaveitasis.
Theinputsareprimarilyintheinputsheet.Ifyourcompanyhasoperatingleases,
usetheoperatingleaseworksheettoenteryourleaseorrentalcommitments.
Enterallnumbersinthesameunits(000s,millionsorevenbillions)
Thekeyincomeinputistheearningsbeforelongterminterestexpensesanddepreciation.
Enterthemostupdatednumbersyouhaveforeach(eveniftheyare12monthtrailing
numbers).Ifthemostrecentperiodforwhichyouhavedatahasanoperatingincomethat
isabnormal,eitherbecauseofextraordinarylosses/gainsorsomeotheroccurrence,use
anaverageoperatingincomeoverthelastfewyears.
Enterthebookvalueoftotaldebt.Ifyouhaveamarketvalueenterthat
number.Alternatively,inputtheaveragematurityofthedebtandIwillestimatethe
marketvalueofdebt.
Enterthecurrentstockprice,thecurrentriskfreerate,theequityrisk
premiumyouwouldliketousetoestimateyourcostofequityandthecurrentratingfor
yourfirm.Ifyoudonothavearating,thereisanoptionforyouattheverybottomof
thespreadsheettocomputeasyntheticrating.
Enteramarginaltaxrate,ifyoucanfindit.Otherwise,usethemarginaltaxrateofcountry
Thisspreadsheethasinterestcoverageratios,ratingsanddefaultspreadsbuiltintoitin
theworksheet.Youcanchoosebetweentwotables,oneforlargeandstable
firms,andtheotherforsmallorriskyfirms.Ifyouwantyoucanchangetheinterest
coverageratiosandratingsinthesetables.
READINGTHEOUTPUT
Thesummaryprovidesapictureofyourfirm'scurrentcostofcapitalanddebtratio,and
comparesittoyourfirm'soptimaldebtratioandthecostofcapitalatthatlevel.The
firmvalueiscomputedateachdebtratio,baseduponhowtheexpectedoperatingincome
andthecostofcapital.Theoptimaldebtratioisthatratioatwhichfirmvalueis
maximized.Itmightnotbethesamepointatwhichcostofcapitalisminimized.
Thedetailsofthecalculationateachdebtratioarebelowthesummary.

actice,Chapter18

Question
Q1: What do I do excel says there are circular re
Q2: My spreadsheet has gone crazy. I get errors
all over. What did I do wrong?
Q3: I am entering the inputs for my company
but the optimal numbers do not seem to
change from the originals.
Q4: I am getting an optimal debt ratio of 0%.
This can't be right. Can it?
Q5: My cost of capital at my optimal debt ratio is
than the current cost of capital. I thought it was
to be lower.

Q6: I am getting an optimal debt ratio at a mix

of capital is not minimized? Is something wrong?

Answer
Go into preferences, choose calculation options and make sure the iteration box has a check in it.
I am sorry to say this, but you probably just made an input error. While you
might have fixed it, the iterations in the spreadsheet make it very sensitive
and the errors will not go away. The only fix (Sorry, sorry) is to copy the
inputs into a fresh version of the spreadsheet.
You probably forgot to check the iteration box (see Q1)
Sure. If your operating income is either negative or very low, relative to your firm value,
you can end up at an optimal debt ratio of 0%. For instance, if you have EBIT of 100 on a
firm value of 10000, a 10% debt ratio would probably push you into a C rating and give
you a very high cost of capital.
Generally, you are right. However, I would suggest that you look at three factors:
- If your optimal is just slightly higher or lower than your current debt ratio, it is possible that you
are closer to the optimal than the stated optimal. Let me explain. Assume that you are at a 24% debt ratio
and the optimal comes out to 30%. The true optimal is really somewhere around 30% since
I am constrained to work in 10% increments of the debt ratio. If the true optimal were
26%, your current debt ratio of 24% is closer to the optimal.
- Rating Differences: One of the costs of rating a company based only on the interest
coverage ratio is that the rating might be very different from the actual rating. Thus, your
current cost of capital is based upon your current rating, and the optimal is based upon
the synthetic ratings, and the two don't match, the current and the optimal cost of capital
can be mismatched. You can get around this by switching to a synthetic rating for computing
the current cost of capital (in the input sheet).
- Existing debt at low rates: I assume in the spreadsheet that existing debt gets refinanced at
the new pre-tax cost of debt at each debt ratio. Consequently, if you have a lot of old debt on
your books at much lower rates, the interest expense that I report will be much higher than
your actual interest expense. This, in turn, can affect your interest coverage ratio and rating.
This, too, you can fix by locking in debt at current rates in the input sheet.
Not necessarily. If you chose to build in indirect bankruptcy costs (an option on the input page),
your operating income also changes as your debt ratio changes. Since the objective ultimately is to
maximize firm value, it is possible that the net effect (lower cost of capital is good but it could be offset
by lower operating income) is resulting in an optimal at a higher debt ratio.

s a check in it.

ssible that you

are at a 24% debt ratio

financed at
old debt on

input page),
e ultimately is to
but it could be offset

Inputs
Please enter the name of the company you are analyzing:

Disney

Please enter the date that you are doing this analysis

Nov-13

Financial Information
Earnings before interest expenses, depreciation & amortization (EBIT

$11,642.00

Depreciation and Amortization:

$2,192.00

Capital Spending:

$5,239.00

Interest expense on debt:

$349.00

Marginal tax rate to use for pre-tax cost of debt

36.10%

Current Bond Rating on debt (if available):

A2/A

Enter the current pre-tax cost of debt for your company

3.75%

Market Information & information on debt

Number of shares outstanding:

1800

Market price per share:

$67.71

Beta of the stock:

1.0013

Cash and marketable securities =

Book value of debt:
Can you estimate the market value of the interest bearing debt?

$3,931.00
$

14,288.00
No

If so, enter the market value of "interest bearing" debt:

Do you want me to try and estimate market value of debt?
If yes, enter the weighted average maturity of outstanding debt?
Do you have any operating leases?

Yes
7.92
Yes

Indirect bankruptcy costs & ratings constraints (if any)

Do you want to incorporate indirect bankruptcy costs into your optima
If yes, specify the magnitude of your indirect bankruptcy costs

No
Medium

General Market Data

Current riskfree rate in the currency of analysis =

2.12%

Risk premium (for use in the CAPM)

5.76%

Country Default spread (for cost of debt)

0.00%

General Data
Which spread/ratio table would you like to use for your anlaysis?
Do you want to assume that existing debt is refinanced at the 'new' r

1
Yes

Do you want the firm's current rating & cost of debt to be adjusted to

Yes

OutputSummary
Current

Optimal

Debt to Capita 11.70%

50.00%

Cost of capita

7.15%

Enterprise val $134,089

Value per sha

$67.71

6.42%
$157,158
$80.53

Fordetails,check"OptimalCapitalStructure"worksheet

(YesorNo)

(YesorNo)

Country

Tax Rate
20.00%
Afghanistan
10.00%
Albania
35.00%
Angola
35.00%
Argentina
20.00%
Armenia
28.00%
Aruba
30.00%
Australia
25.00%
Austria
0.00%
Bahamas
0.00%
Bahrain
27.50%
Bangladesh
25.00%
Barbados
18.00%
Belarus
33.99%
Belgium
0.00%
Bermuda
25.00%
Bolivia
0.00%
Bonaire
Bosnia and He 10.00%
22.00%
Botswana
34.00%
Brazil
10.00%
Bulgaria
20.00%
Cambodia
26.00%
Canada
0.00%
Cayman Islan
18.50%
Chile
25.00%
China
33.00%
Colombia
30.00%
Costa Rica
20.00%
Croatia
27.50%
Curacao
10.00%
Cyprus
Czech Republi 19.00%
25.00%
Denmark
Dominican Rep 29.00%
23.00%
Ecuador
25.00%
Egypt
21.00%
Estonia
30.00%
El Salvador
28.00%
Fiji
24.50%
Finland
33.33%
France
0.00%
Georgia

Germany
Gibraltar
Greece
Guatemala
Guernsey
Honduras
Hong Kong
Hungary
Iceland
India
Indonesia
Ireland
Isle of Man
Israel
Italy
Jamaica
Japan
Jersey
Jordan
Kazakhstan
Kenya
Korea, Republi
Kuwait
Latvia
Libya
Liechtenstein
Lithuania
Luxembourg
Macau
Macedonia
Malawi
Malaysia
Malta
Mauritius
Mexico
Montenegro
Mozambique
Namibia
Netherlands
New Zealand
Nigeria
Norway
Oman

29.48%
10.00%
20.00%
31.00%
0.00%
35.00%
16.50%
19.00%
20.00%
32.45%
25.00%
12.50%
0.00%
25.00%
31.40%
33.33%
38.01%
0.00%
14.00%
20.00%
30.00%
24.20%
15.00%
15.00%
20.00%
12.50%
15.00%
28.80%
12.00%
10.00%
30.00%
25.00%
35.00%
15.00%
30.00%
9.00%
32.00%
34.00%
25.00%
28.00%
30.00%
28.00%
12.00%

Pakistan
Panama
Papua New Gu
Paraguay
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saba
Samoa
Saudi Arabia
Serbia
Singapore
Slovak Republ
Slovenia
South Africa
Spain
Sri Lanka
St Eustatius
St Maarten
Sudan
Sweden
Switzerland
Syria
Taiwan
Tanzania
Thailand
Trinidad and
Tunisia
Turkey
Uganda
Ukraine
United Arab E
United Kingd
United States
Uruguay
Vanuatu
Venezuela
Vietnam
Yemen

35.00%
25.00%
30.00%
10.00%
30.00%
30.00%
19.00%
25.00%
10.00%
16.00%
20.00%
0.00%
27.00%
20.00%
10.00%
17.00%
19.00%
18.00%
34.55%
30.00%
28.00%
0.00%
34.50%
35.00%
26.30%
21.17%
28.00%
17.00%
30.00%
23.00%
25.00%
30.00%
20.00%
30.00%
21.00%
55.00%
24.00%
40.00%
25.00%
0.00%
34.00%
25.00%
20.00%

Zambia
Zimbabwe
Africa averag
North Americ
Asia average
Europe avera
Latin America
Oceania aver
EU average
OECD averag
Global averag

35.00%
25.75%
29.02%
33.00%
22.89%
20.50%
28.30%
28.60%
22.60%
25.25%
24.43%

OperatingLeaseConverter

Operatingleaseexpensesarereallyfinancialexpenses,andshouldbetreatedassuch.Accountingstandardsallowth
betreatedasoperatingexpenses.Thisprogramwillconvertcommitmentstomakeoperatingleasesintodebtand
adjusttheoperatingincomeaccordingly,byaddingbacktheimputedinterestexpenseonthisdebt.
Inputs
Operatingleaseexpenseincurrentyear=
OperatingLeaseCommitments(Fromfootnotetofinancials)
Year
Commitment !Year1isnextyear,.
1
$507.00
2
$422.00
3
$342.00
4
$272.00
5
$217.00
6andbeyond $1,784.00
PretaxCostofDebt=

2.52%

$875.00

!Ifyoudonothaveacostofdebt,usetheattachedratingsestimator

Fromthecurrentfinancialstatements,enterthefollowing
ReportedOperatingIncome(EBIT)=
$9,450.00 !ThisistheEBITreportedinthecurrentincomestatement
ReportedInterestExpenses=
$349.00
Output
Numberofyearsembeddedinyr6estimate=
5
!Iusetheaverageleaseexpenseoverthefirstfiveyears
toestimatethenumberofyearsofexpensesinyr6
ConvertingOperatingLeasesintodebt
Year
Commitment
PresentValue
1 $507.00
$494.54
2 $422.00
$401.51
3 $342.00
$317.40
4 $272.00
$246.23
5 $217.00
$191.61
6andbeyond
$356.80
$1,462.83 !Commitmentbeyondyear6convertedintoanannuityfortenyears
DebtValueofleases=
$3,114.11
RestatedFinancials
OperatingIncomewithOperatingleasesreclassifiedasdebt=
InterestexpenseswithOperatingleasesclassifiedasdebt=
Depreciationwithoperatingleasesclassifiedasdebt=

$10,013.59
$427.48
$ 2,503.41

verter

ountingstandardsallowthemto
ngleasesintodebtand

entincomestatement

thefirstfiveyears

Inputsforsyntheticratingestimation
Enterthetypeoffirm=
Earningsbeforeinterestandtaxes(EBIT)=
Currentinterestexpenses=
Currentlongtermgovernmentbondrate=
Output
Interestcoverageratio=
EstimatedBondRating=
EstimatedDefaultSpread=
EstimatedCostofDebt=

1 (Enter1iflargefinancialservicefirm,2ifsmallerfinancialservicefirm)
$10,013.59 (Addbackonlylongterminterest
$427.48 (Useonlylongterminterestexpen
2.12%
23.42
Aaa/AAA
0.40%
2.52%

Forlargemanufacturingfirms
Ifinterestcoverageratiois
>
to
100000
0.199999
0.2
0.649999
0.65
0.799999
0.8
1.249999
1.25
1.499999
1.5
1.749999
1.75
1.999999
2
2.2499999
2.25
2.49999
2.5
2.999999
3
4.249999
4.25
5.499999
5.5
6.499999
6.5
8.499999
8.50
100000

Ratingis
D2/D
C2/C
Ca2/CC
Caa/CCC
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA
Aaa/AAA

Spreadis
12.00%
10.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.25%
2.75%
1.75%
1.20%
1.00%
0.90%
0.70%
0.40%

DropinEBITDA
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Forsmallerandriskierfirms
Ifinterestcoverageratiois
greaterthan
to
100000
0.499999
0.5
0.799999
0.8
1.249999
1.25
1.499999
1.5
1.999999
2
2.499999
2.5
2.999999
3
3.499999
3.5
3.9999999
4
4.499999
4.5
5.999999
6
7.499999
7.5
9.499999
9.5
12.499999

Ratingis
D2/D
C2/C
Ca2/CC
Caa/CCC
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA

Spreadis
12.00%
10.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.25%
2.75%
1.75%
1.20%
1.00%
0.90%
0.70%

DropinEBITDA
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

12.5

100000

Aaa/AAA

0.40%

0.00%

cialservicefirm)
ddbackonlylongterminterestexpenseforfinancialfirms)
eonlylongterminterestexpenseforfinancialfirms)

CAPITALSTRUCTURE

17

Disney
November1,2013
CapitalStructure
CurrentMVofEquity=
$121,878
MarketValueofinterestbearingd $13,028
#ofSharesOutstanding=
1800
DebtValueofOperatingleases=
$3,114
EquityRiskPremium=
5.76%

FinancialMarket
CurrentBetaforStock=
CurrentBondRating=
SummaryofInputs
LongTermGovernmentBond
Pretaxcostofdebt=

D/(D+E)Ratio=

2.12%
3.75%

RESULTSFROMANALYSIS
Current
Optimal
11.70%
50.00%

BetafortheStock=
CostofEquity=
RatingonDebt
AftertaxcostofDebt=

Assumesperpeutalgrowth

1.00
A2/A

1.001263852
7.89%
A2/A
1.61%

WACC
7.15%
ImpliedGrowthRate=
2.12%
Enterprisevalue
$134,089
Value/share(PerpetualGrowth $67.71

IncomeStatement
CurrentEBITDA=
CurrentDepreciation=
CurrentTaxRate=
CurrentCapitalSpending=
CurrentInterestExpense=

Change
38.30%

1.51
10.84%

0.51
2.95%

1.99%

0.38%

6.42%

0.74%

$157,158
$80.53

$23,069
$12.82

$12,517
$2,503
36.10%
$5,239
$427

Driversoftheoptimaldebtr
Marginaltaxrate=
EBITDA/Enterprisevalue=
EBIT/Enterprisevalue=
Unleveredbeta=

ImpliedGrowthRateCalculation
Enterprisevalue=
$134,089
CurrentWACC=
7.15%
CurrentFCFF=
$3,663.09 !Iamignoringworkingcapital
ImpliedGrowthRate
4.31%
Ifthisnumberis>yourriskfreerate,Iusetheriskfreerateasaperpetualgro

Weusethefollowingdefaultspreadsinouranalysis.Changethemintheinputsheetifnecessary:
Ratingscomparisonatcurrentdebtratio
23.42
Rating
Coveragegt
andlt
Spread
DropinEBITDACurrentInterestcoverageratio=
AAA
8.5
100000
0.40%
0.00% Ratingbaseduponcoverage=
Aaa/AAA
AA
6.5
8.499999
0.70%
0.00% Interestratebaseduponcoverage=
2.52%
A+
5.5
6.499999
0.90%
0.00% Currentratingforcompany=
A2/A
A
4.25
5.499999
1.00%
0.00% Currentinterestrateondebt=
3.75%
A
3
4.249999
1.20%
0.00% Dropinoperatingincomebasedoncurrentrating
0.00%
BBB
2.5
2.999999
1.75%
0.00%
BB
2
2.2499999
3.25%
0.00%
B+
1.75
1.999999
4.00%
0.00%
B
1.5
1.749999
5.00%
0.00%
B
1.25
1.499999
6.00%
0.00%
CCC
0.8
1.249999
7.00%
0.00%
CC
0.65
0.799999
8.00%
0.00%
C
0.2
0.649999
10.00%
0.00%
D
100000
0.199999
12.00%
0.00%

CAPITALSTRUCTURE
Currentbeta=
CurrentDebt=
Taxrate=
Enterprisevalue=

1.00
$16,142
36.10%
$134,089

D/(D+E)
D/E
$Debt
Beta
CostofEquity
%DropinEBITD
EBITDA
Depreciation
EBIT
Interest
TaxableIncome
Tax
NetIncome
(+)Deprec'n
FundsfromOp.

0.00%
0.00%
$0
0.9231
7.44%
0.00%
$12,517
$2,503
$10,014
$0
$10,014
$3,615
$6,399
$2,503
$8,902

10.00%
11.11%
$13,802
0.99
7.82%
0.00%
$12,517
$2,503
$10,014
$348
$9,666
$3,489
$6,176
$2,503
$8,680

PretaxInt.cov
Funds/Debt
LikelyRating
Pretaxcostofdeb
Taxrate

Aaa/AAA
2.52%
36.10%

28.79
0.63
Aaa/AAA
2.52%
36.10%

14.40
0.31
Aaa/AAA
2.52%
36.10%

D/(D+E)
D/E
$Debt
Costofequity
Costofdebt
CostofCapital

0.00%
0.00%
$0
7.44%
1.61%
7.44%
0
$126,925

10.00%
11.11%
$13,802
7.82%
1.61%
7.20%
0
$133,001

20.00%
25.00%
$27,604
8.29%
1.61%
6.95%
0
$139,688

Value(perpetualg

18

$121,878
CurrentEquity=
CurrentDepreciation=
$12,517
CurrentEBITDA=
CurrentInterestrate(Company)=
A2/A
CurrentRating=
CurrentT.Bondrate=
$12,517
AdjustedEBITDA=
WORKSHEETFORESTIMATINGRATINGS/INTERESTRATES
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
25.00%
42.86%
66.67%
100.00%
150.00%
233.33%
$27,604
$41,406
$55,208
$69,010
$82,812
$96,614
1.07
1.18
1.32
1.51
1.81
2.30
8.29%
8.90%
9.70%
10.84%
12.54%
15.37%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
$12,517
$12,517
$12,517
$12,517
$12,517
$12,517
$2,503
$2,503
$2,503
$2,503
$2,503
$2,503
$10,014
$10,014
$10,014
$10,014
$10,014
$10,014
$696
$1,043
$1,667
$2,153
$6,724
$8,811
$9,318
$8,970
$8,346
$7,860
$3,289
$1,202
$3,364
$3,238
$3,013
$2,838
$1,187
$434
$5,954
$5,732
$5,333
$5,023
$2,102
$768
$2,503
$2,503
$2,503
$2,503
$2,503
$2,503
$8,458
$8,235
$7,837
$7,526
$4,605
$3,272

Interestcov

9.60
6.01
4.65
0.20
0.14
0.11
Aaa/AAA
A1/A+
A2/A
2.52%
3.02%
3.12%
36.10%
36.10%
36.10%
COSTOFCAPITALCALCULATIONS
30.00%
40.00%
50.00%
42.86%
66.67%
100.00%
$41,406
$55,208
$69,010
8.90%
9.70%
10.84%
1.61%
1.93%
1.99%
6.71%
6.59%
6.42%
0
0
1
$147,082
$150,868
$157,158
Interestcov

RATING

Interestrate

$2,503
2.52%
2.12%

80.00%
400.00%
$110,416
3.29
21.08%
0.00%
$12,517
$2,503
$10,014
$10,070
($56)
($20)
($36)
$2,503
$2,467

90.00%
900.00%
$124,218
6.84
41.54%
0.00%
$12,517
$2,503
$10,014
$12,571
($2,557)
($923)
($1,634)
$2,503
$869

1.49
0.06
B3/B
8.12%
36.10%

1.14
0.03
Caa/CCC
9.12%
36.10%

0.99
0.02
Caa/CCC
9.12%
35.90%

0.80
0.01
Ca2/CC
10.12%
28.76%

60.00%
150.00%
$82,812
12.54%
5.19%
8.13%
0
$112,365

70.00%
233.33%
$96,614
15.37%
5.83%
8.69%
0
$102,751

80.00%
400.00%
$110,416
21.08%
5.85%
8.89%
0
$99,685

90.00%
900.00%
$124,218
41.54%
7.21%
10.64%
0
$79,206

Dropin

CAPITALSTRUCTURE
Low
100000
0.2
0.65
0.8
1.25
1.5
1.75
2
2.25
2.5
3
4.25
5.5
6.5
8.5

High
0.199999
0.649999
0.799999
1.249999
1.499999
1.749999
1.999999
2.2499999
2.49999
2.999999
4.249999
5.499999
6.499999
8.499999
100000

D2/D
C2/C
Ca2/CC
Caa/CCC
B3/B
B2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/A
A2/A
A1/A+
Aa2/AA
Aaa/AAA

14.12%
12.12%
10.12%
9.12%
8.12%
7.12%
6.12%
5.37%
4.87%
3.87%
3.32%
3.12%
3.02%
2.82%
2.52%

19
EBITDA
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

CAPITALSTRUCTURE

Driversoftheoptimaldebtratio
Marginaltaxrate=
36.10%
EBITDA/Enterprisevalue=
9.33%
EBIT/Enterprisevalue=
7.47%
Unleveredbeta=
0.9231

!Iamignoringworkingcapital

usetheriskfreerateasaperpetualgrowthrate.

20

CAPITALSTRUCTURE

21

CAPITALSTRUCTURE

22

Stock price buyback effect

Current Stock price =
# Shares outstanding before buyback
Expected buyback price =

$67.71
1800.00
$67.71 Enter this number

Current Debt =
Debt at Optimal =
New Debt issued =
# Shares bought back =
Shares outstanding after buyback =

$16,142
$69,010
$52,868
780.800899
1019.20

Enterprise value after buyback =

+ Cash
- Debt
Equity value after buyback
/ Number of shares after buyback
Value per share for remaining shares

$157,158
3931
$69,009.97
$92,079.07
1019.20
$90.34

Enterprise Value
$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0
Debt Ratio

DebtRatio
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%

Beta
0.9231
0.9887
1.0706
1.1759
1.3164
1.5130
1.8080
2.2995
3.2901
6.8422

DebtRatio
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%

$Debt
$0
$13,802
$27,604
$41,406
$55,208
$69,010
$82,812
$96,614
$110,416
$124,218

CostofEquity
7.44%
7.82%
8.29%
8.90%
9.70%
10.84%
12.54%
15.37%
21.08%
41.54%

BondRating Interestrateondebt
Aaa/AAA
2.52%
Aaa/AAA
2.52%
Aaa/AAA
2.52%
Aaa/AAA
2.52%
A1/A+
3.02%
A2/A
3.12%
B3/B
8.12%
Caa/CCC
9.12%
Caa/CCC
9.12%
Ca2/CC
10.12%

InterestExpense
InterestCoverageRatioBondRating
$0

Aaa/AAA
$348
28.79
Aaa/AAA
$696
14.40
Aaa/AAA
$1,043
9.60
Aaa/AAA
$1,667
6.01
A1/A+
$2,153
4.65
A2/A
$6,724
1.49
B3/B
$8,811
1.14
Caa/CCC
$10,070
0.99
Caa/CCC
$12,571
0.80
Ca2/CC

TaxRate
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
35.90%
28.76%

Pretaxcostofd
2.52%
2.52%
2.52%
2.52%
3.02%
3.12%
8.12%
9.12%
9.12%
10.12%

CostofDebt(aftertax)
1.61%
1.61%
1.61%
1.61%
1.93%
1.99%
5.19%
5.83%
5.85%
7.21%

Taxrate
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
36.10%
35.90%
28.76%

WACC
7.44%
7.20%
6.95%
6.71%
6.59%
6.42%
8.13%
8.69%
8.89%
10.64%

EnterpriseValue
$126,925
$133,001
$139,688
$147,082
$150,868
$157,158
$112,365
$102,751
$99,685
$79,206

Aftertaxcostofdebt
1.61%
1.61%
1.61%
1.61%
1.93%
1.99%
5.19%
5.83%
5.85%
7.21%

Rating is
Aaa/AAA
Aa2/AA
A1/A+
A2/A
A3/ABaa2/BBB
Ba1/BB+
Ba2/BB
B1/B+
B2/B
B3/BCaa/CCC
Ca2/CC
C2/C
D2/D
Not rated
Rating is
D2/D
Caa/CCC
Ca2/CC
C2/C
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA
Aaa/AAA

Yes/No
Yes
No

Low IBC
-30%
-25%
-25%
-25%
-15%
-10%
-10%
-10%
-10%
-5%
0.00%
0.00%
0.00%
0.00%
0%

Medium
-50.00%
-40.00%
-40.00%
-40.00%
-25.00%
-20.00%
-20.00%
-20.00%
-20.00%
-10.00%
-2.00%
0.00%
0.00%
0.00%
0.00%

High IBC
-100%
-50%
-50%
-50%
-30%
-25%
-25%
-25%
-25%
-15%
-5%
-2%
0%
0%
0%

IBC
High
Medium
Low

Type of firm
1
2