Beta of PC Ltd

Accounting Apr 03, 2021

Beta of PC Ltd. is 1.5 when the debt level (wd) is 20% You want to estimate the optimal capital structure of the company and the value of the firm The company has growth rate of 0.The expected Free Cash Flow (FCF) is 40 million Data for other market information is given below Risk-free rate 4% MRP 12% Tax 30% Beta of the firm at 20% debt 1.50 You received the below estimates (from a bank) of cost of debt at different levels of debt in the capital structure

weight to debt wd 0.00% 25.00% 50.00% 75.00% 90.00%

cost of debt rd 0.00% 6.00% 8.00% 10.00% 20.00%

a) Find the optimal capital structure

b) Find the WACC and Value of operation at optimal capital structure

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