Establishment Industries market-value balance sheet
Here is Establishment Industries market-value balance sheet (Figures in millions): Net working capital $ 850 Debt $ 1,320 Long-term assets 2,900 Equity 2,430 Value of firm $ 3,750 $ 3,750 The debt is yielding 6.1%, and the cost of equity is 14.9%. The tax rate is 35%. Investors expect this level of debt to be permanent. a. What is Establishment’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC % b. How would the market-value balance sheet change if Establishment retired all its debt? (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.) New Market-Value Balance Sheet (figures in millions) Net working capital $ Debt $ Long-term assets Equity Value of firm $ Total $
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