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What would be a summary of the following information

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Reference no: EM131624960

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

Reference no: EM131624960

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