Summation Before After cl hange Market Value of Firm $35000 $30000 Cost of Capital 14.29%16.67% MV Per share s10 S8
Summation Before After Change Market Value of Firm $35000 $30000 Cost of Capital 14.29% 16.67% MV Per Share $10 $8
Summation With the introduction of more debt the equity holders' perception of the value of the firm has declined to $8 as the return stream has become more risky, the cost of capital has increased from 14, 29%/ to 16,679
Summation ◼ With the introduction of more debt, the equity holders’ perception of the value of the firm has declined to $8. ◼ As the return stream has become more risky, the cost of capital has increased from 14.29% to 16.67%