Complete the tables below using the following information about Petty enterprises: Petty currently has an all equity capital structure and is considering a new structure with 30% debt.
There are 3,000 common shares outstanding with a total market value of $150,000. The interest rate on the new debt will be 14%. Assume no taxes.
|
Old Structure = 100% Equity
|
|
EBIT
|
20,000
|
35,000
|
50,000
|
|
Interest
|
|
|
|
|
Net Income
|
|
|
|
|
New Structure = 75% Equity, 30% Debt
|
|
EBIT
|
20,000
|
35,000
|
50,000
|
|
Interest
|
|
|
|
|
Net Income
|
|
|