What would be a summary of the following information:
Beca Corporations (in millions)
w/o leverage w/ leverage
success failure success failure
Debt Value 0 0 150 130
Equity Value 200 130 50 0
Total to All Investors 200 130 200 130
Equity (unlevered) 157.14 =(0.5*(200)+0.5*(130))/1.05
Value of Unlevered firm $157.14 million
Equity (levered) 23.81 =(0.5*(50)+0.5*(0))/1.05
Debt 133.33 =(0.5*(150)+0.5*(130))/1.05
Value of Levered firm 157.14 =Equity (levered) + Debt
MM Proposition I holds. The value of secruities with or without leverage have the same total value.
Equity (unlevered) 149.66 =157.14/1.05
Equity (levered) 2.68 =23.81/1.05
Debt 126.98 =133.33/1.05
Value 149.66 =22.68+126.98