PRELIMINARY STUFF AND INPUTS

Objective This spreadsheet allows you to compute the optimal capital structure for a non-financial
service firm
Before you start Open preferences in excel, go into calculation options and put a check in the iteration box.
If it is already checked, leave it as is.
Inputs The inputs are primarily in the input sheet. If your company has operating leases,
use the operating lease worksheet to enter your lease or rental commitments.
Units Enter all numbers in the same units (000s, millions or even billions)
Income inputs The key income input is the earnings before long term interest expenses and depreciation
Enter the most updated numbers you have for each (even if they are 12-month trailing
numbers). If the most recent period for which you have data has an operating income that
is abnormal, either because of extraordinary losses/gains or some other occurrence, use
an average operating income over the last few years.
Balance Sheet Enter the book value of total debt. If you have a market value enter that
number. Alternatively, input the average maturity of the debt and I will estimate the
market value of debt.
Market Data Enter the current stock price, the current risk free rate, the equity risk
premium you would like to use to estimate your cost of equity and the current rating for
your firm. If you do not have a rating, there is an option for you at the very bottom of
the spreadsheet to compute a synthetic rating.
Tax Rate Enter a marginal tax rate, if you can find it. Otherwise, use the marginal tax rate of country
Default Spreads This spreadsheet has interest coverage ratios, ratings and default spreads built into it in
the worksheet. You can choose between two tables, one for large and stable
firms, and the other for small or risky firms. If you want you can change the interest
coverage ratios and ratings in these tables.
READING THE OUTPUT
Summary The summary provides a picture of your firm's current cost of capital and debt ratio, and
compares it to your firm's optimal debt ratio and the cost of capital at that level. The
firm value is computed at each debt ratio, based upon how the expected operating income
and the cost of capital. The optimal debt ratio is that ratio at which firm value is
maximized. It might not be the same point at which cost of capital is minimized.
Details The details of the calculation at each debt ratio are below the summary.

References
Corporate Finance: Theory and Practice, Chapter 18
Applied Corporate Finance: Chapter 8
ure for a non-financial

heck in the iteration box.

perating leases,

penses and depreciation.

re 12-month trailing
n operating income that
other occurrence, use

I will estimate the

d the current rating for

t the very bottom of

arginal tax rate of country

spreads built into it in

change the interest

ital and debt ratio, and

al at that level. The
pected operating income
h firm value is
l is minimized.
Question
Q1: What do I do excel says there are circular

Q2: My spreadsheet has gone crazy. I get

errors all over. What did I do wrong?

Q3: I am entering the inputs for my company

but the optimal numbers do not seem to
change from the originals.

Q4: I am getting an optimal debt ratio of 0%.

This can't be right. Can it?

Q5: My cost of capital at my optimal debt ratio

than the current cost of capital. I thought it w
to be lower.

Q6: I am getting an optimal debt ratio at a mix

of capital is not minimized? Is something wron
Answer
Go into preferences, choose calculation options and make sure the iteration box has a check in it.
I am sorry to say this, but you probably just made an input error. While you
might have fixed it, the iterations in the spreadsheet make it very sensitive
and the errors will not go away. The only fix (Sorry, sorry…) is to copy the
inputs into a fresh version of the spreadsheet.

You probably forgot to check the iteration box (see Q1)

Sure. If your operating income is either negative or very low, relative to your firm value,
you can end up at an optimal debt ratio of 0%. For instance, if you have EBIT of 100 on a
firm value of 10000, a 10% debt ratio would probably push you into a C rating and give
you a very high cost of capital.
Generally, you are right. However, I would suggest that you look at three factors:
- If your optimal is just slightly higher or lower than your current debt ratio, it is possible that you
are closer to the optimal than the stated optimal. Let me explain. Assume that you are at a 24% debt ratio
and the optimal comes out to 30%. The true optimal is really somewhere around 30% since
I am constrained to work in 10% increments of the debt ratio. If the true optimal were
26%, your current debt ratio of 24% is closer to the optimal.
- Rating Differences: One of the costs of rating a company based only on the interest
coverage ratio is that the rating might be very different from the actual rating. Thus, your
current cost of capital is based upon your current rating, and the optimal is based upon
the synthetic ratings, and the two don't match, the current and the optimal cost of capital
can be mismatched. You can get around this by switching to a synthetic rating for computing
the current cost of capital (in the input sheet).
- Existing debt at low rates: I assume in the spreadsheet that existing debt gets refinanced at
the new pre-tax cost of debt at each debt ratio. Consequently, if you have a lot of old debt on
your books at much lower rates, the interest expense that I report will be much higher than
your actual interest expense. This, in turn, can affect your interest coverage ratio and rating.
This, too, you can fix by locking in debt at current rates in the input sheet.
Not necessarily. If you chose to build in indirect bankruptcy costs (an option on the input page),
your operating income also changes as your debt ratio changes. Since the objective ultimately is to
maximize firm value, it is possible that the net effect (lower cost of capital is good but it could be offset
by lower operating income) is resulting in an optimal at a higher debt ratio.
Inputs
Please enter the name of the company you are analyzing: Dell
Please enter the date that you are doing this analysis Apr-13

Financial Information
Earnings before interest expenses, depreciation & amortization $4,156.00

Depreciation and Amortization: $1,144.00

Capital Spending: $513.00
Interest expense on debt: $270.00

Marginal tax rate to use for pre-tax cost of debt 35.90%

Current Bond Rating on long term debt (if available): A3/A-

Enter the current pre-tax cost of debt for your company 3.05%

Market Information & information on debt

Number of shares outstanding: 1747.22
Market price per share: $14.04

Beta of the stock: 1.74

Book value of debt: $ 9,085.00

Can you estimate the market value of the interest bearing debt? No
If so, enter the market value of "interest bearing" debt:

Do you want me to try and estimate market value of debt? Yes

If yes, enter the weighted average maturity of outstanding debt? 4.44

Do you have any operating leases? Yes
Indirect bankruptcy costs & ratings constraints (if any)

Do you want to incorporate indirect bankruptcy costs into your opt Yes
If yes, specify the magnitude of your indirect bankruptcy costs Low

General Market Data

Current riskfree rate in the currency of analysis = 1.75% \
Risk premium (for use in the CAPM) 6.71%

Country Default spread (for cost of debt) 0.00%

General Data
Which spread/ratio table would you like to use for your anlaysis? 1
Do you want to assume that existing debt is refinanced at the 'new' Yes (Yes or No)
Do you want the firm's current rating & cost of debt to be adjusted No (Yes or No)
Country Tax Rate
Afghanistan 20.00%
Albania 10.00%
Angola 35.00%
Argentina 35.00%
Armenia 20.00%
Aruba 28.00%
Australia 30.00%
Austria 25.00%
Bahamas 0.00%
Bahrain 0.00%
Bangladesh 27.50%
Barbados 25.00%
Belarus 18.00%
Belgium 33.99%
Bermuda 0.00%
Bolivia 25.00%
Bonaire 0.00%
Bosnia and H 10.00%
Botswana 22.00%
Brazil 34.00%
Bulgaria 10.00%
Cambodia 20.00%
Canada 26.00%
Cayman Islan 0.00%
Chile 18.50%
China 25.00%
Colombia 33.00%
Costa Rica 30.00%
Croatia 20.00%
Curacao 27.50%
Cyprus 10.00%
Czech Republ 19.00%
Denmark 25.00%
Dominican Re 29.00%
Ecuador 23.00%
Egypt 25.00%
Estonia 21.00%
El Salvador 30.00%
Fiji 28.00%
Finland 24.50%
France 33.33%
Georgia 0.00%
Germany 29.48%
Gibraltar 10.00%
Greece 20.00%
Guatemala 31.00%
Guernsey 0.00%
Honduras 35.00%
Hong Kong 16.50%
Hungary 19.00%
Iceland 20.00%
India 32.45%
Indonesia 25.00%
Ireland 12.50%
Isle of Man 0.00%
Israel 25.00%
Italy 31.40%
Jamaica 33.33%
Japan 38.01%
Jersey 0.00%
Jordan 14.00%
Kazakhstan 20.00%
Kenya 30.00%
Korea, Republ 24.20%
Kuwait 15.00%
Latvia 15.00%
Libya 20.00%
Liechtenstein 12.50%
Lithuania 15.00%
Luxembourg 28.80%
Macau 12.00%
Macedonia 10.00%
Malawi 30.00%
Malaysia 25.00%
Malta 35.00%
Mauritius 15.00%
Mexico 30.00%
Montenegro 9.00%
Mozambique 32.00%
Namibia 34.00%
Netherlands 25.00%
New Zealand 28.00%
Nigeria 30.00%
Norway 28.00%
Oman 12.00%
Pakistan 35.00%
Panama 25.00%
Papua New G 30.00%
Paraguay 10.00%
Peru 30.00%
Philippines 30.00%
Poland 19.00%
Portugal 25.00%
Qatar 10.00%
Romania 16.00%
Russia 20.00%
Saba 0.00%
Samoa 27.00%
Saudi Arabia 20.00%
Serbia 10.00%
Singapore 17.00%
Slovak Repub 19.00%
Slovenia 18.00%
South Africa 34.55%
Spain 30.00%
Sri Lanka 28.00%
St Eustatius 0.00%
St Maarten 34.50%
Sudan 35.00%
Sweden 26.30%
Switzerland 21.17%
Syria 28.00%
Taiwan 17.00%
Tanzania 30.00%
Thailand 23.00%
Trinidad and 25.00%
Tunisia 30.00%
Turkey 20.00%
Uganda 30.00%
Ukraine 21.00%
United Arab 55.00%
United King 24.00%
United States 40.00%
Uruguay 25.00%
Vanuatu 0.00%
Venezuela 34.00%
Vietnam 25.00%
Yemen 20.00%
Zambia 35.00%
Zimbabwe 25.75%
Africa averag 29.02%
North Americ 33.00%
Asia average 22.89%
Europe avera 20.50%
Latin Americ 28.30%
Oceania aver 28.60%
EU average 22.60%
OECD averag 25.25%
Global avera 24.43%
 Operating Lease Converter
Operating lease expenses are really financial expenses, and should be treated as such. Accounting standards allow th
be treated as operating expenses. This program will convert commitments to make operating leases into debt and
adjust the operating income accordingly, by adding back the imputed interest expense on this debt.

Inputs
Operating lease expense in current year = $137.00
Operating Lease Commitments (From footnote to financials)
Year Commitment ! Year 1 is next year, ….
1 $ 137.00
2 $ 132.00
3 $ 106.00
4 $ 86.00
5 $ 53.00
6 and beyond $ 99.00

Pre-tax Cost of Debt = 3.05% ! If you do not have a cost of debt, use the attached ratings estimator

From the current financial statements, enter the following

Reported Operating Income (EBIT) = $3,012.00 ! This is the EBIT reported in the current income statement
Reported Interest Expenses = $270.00
Output
Number of years embedded in yr 6 estima 1 ! I use the average lease expense over the first five years
to estimate the number of years of expenses in yr 6
Converting Operating Leases into debt
Year Commitment Present Value
1 $ 137.00 $132.95
2 $ 132.00 $124.30
3 $ 106.00 $96.86
4 $ 86.00 $76.26
5 $ 53.00 $45.61
6 and beyond $ 99.00 $82.67 ! Commitment beyond year 6 converted into an annuity for ten years
Debt Value of leases = $ 558.65

Restated Financials
Operating Income with Operating leases reclassified as debt = $ 3,029.04
Interest expenses with Operating leases classified as debt = $ 287.04
unting standards allow them to
g leases into debt and
Inputs for synthetic rating estimation
Enter the type of firm = 1 (Enter 1 if large financial service firm, 2 if smaller financial service firm)
Earnings before interest and taxes (EBIT) = $3,029.04 (Add back only long term interest expense for financial f
Current interest expenses = $287.04 (Use only long term interest expense for financial firms)
Current long term government bond rate = 1.75%
Output
Interest coverage ratio = 10.55
Estimated Bond Rating = Aaa/AAA
Estimated Default Spread = 0.40%
Estimated Cost of Debt = 2.15%

For large manufacturing firms

If interest coverage ratio is
> ≤ to Rating is Spread is Drop in EBITDA
-100000 0.199999 D2/D 12.00% -30.00%
0.2 0.649999 Caa/CCC 10.50% -25.00%
0.65 0.799999 Ca2/CC 9.50% -25.00%
0.8 1.249999 C2/C 8.75% -25.00%
1.25 1.499999 B3/B- 7.25% -15.00%
1.5 1.749999 Ba1/BB+ 6.50% -10.00%
1.75 1.999999 Ba2/BB 5.50% -10.00%
2 2.2499999 B1/B+ 4.00% -10.00%
2.25 2.49999 B2/B 3.00% -10.00%
2.5 2.999999 Baa2/BBB 2.00% -5.00%
3 4.249999 A3/A- 1.30% 0.00%
4.25 5.499999 A2/A 1.00% 0.00%
5.5 6.499999 A1/A 0.85% 0.00%
6.5 8.499999 Aa2/AA 0.70% 0.00%
8.50 100000 Aaa/AAA 0.40% 0.00%

For smaller and riskier firms

If interest coverage ratio is
greater than ≤ to Rating is Spread is Drop in EBITDA
-100000 0.499999 D2/D 12.00% -30.00%
0.5 0.799999 Caa/CCC 10.50% -25.00%
0.8 1.249999 Ca2/CC 9.50% -25.00%
1.25 1.499999 C2/C 8.75% -25.00%
1.5 1.999999 B3/B- 7.25% -15.00%
2 2.499999 Ba1/BB+ 6.50% -10.00%
2.5 2.999999 Ba2/BB 5.50% -10.00%
3 3.499999 B1/B+ 4.00% -10.00%
3.5 3.9999999 B2/B 3.00% -10.00%
4 4.499999 Baa2/BBB 2.00% -5.00%
4.5 5.999999 A3/A- 1.30% 0.00%
6 7.499999 A2/A 1.00% 0.00%
7.5 9.499999 A1/A 0.85% 0.00%
9.5 12.499999 Aa2/AA 0.70% 0.00%
12.5 100000 Aaa/AAA 0.40% 0.00%
nterest expense for financial firms)
t expense for financial firms)
 CAPITAL STRUCTURE 17

Dell
April 1, 2013 Drivers of the optimal debt ratio
Capital Structure Financial Market Income Statement Marginal tax rate = 35.90%
Current MV of Equity = $24,531 Current Beta for Stock 1.74 Current EBITDA = $4,173 EBITDA/ Firm value = 12.42%
Market Value of interest-b $9,056 Current Bond Rating = A3/A- Current Depreciation = $1,144 EBIT/ Firm value = 9.02%
# of Shares Outstanding = 1747.22 Summary of Inputs Current Tax Rate = 35.90% Unlevered beta = 1.39
Debt Value of Operating le $559 Long Term Government 1.75% Current Capital Spendi $513
Equity Risk Premium = 6.71% Pre-tax cost of debt = 3.05% Current Interest Expens $287

RESULTS FROM ANALYSIS

Current Optimal Change
D/(D+E) Ratio = 28.16% 50.00% 21.84%
Implied Growth Rate Calculation
Beta for the Stock = 1.74 2.28 0.54 Value of Fi $34,146
Cost of Equity = 13.43% 17.06% 3.64% Current W 10.20%
Rating on Debt A3/A- Current FC $2,572.61 ! I am ignoring working capital
After-tax cost of Debt = 1.96% 1.57% -0.38% Implied Gro 2.47%
If this number is >your riskfree rate, I use the riskfree rate as a perpetual growth rate.
WACC 10.20% 9.32% -0.88%
Implied Growth Rate = 1.75%
Assumes perpeutal growth Firm Value (Perpetual $34,146 $38,534 $4,388
Value/share (Perpetual $14.04 $16.55 $2.51

We use the following default spreads in our analysis. Change them in the input sheet if Ratings comparison at current debt ratio
Rating Coverage g and lt Spread Drop in EB Current Interest coverage ratio = 10.55
AAA 8.5 100000 0.40% 0.00% Rating based upon coverage = Aaa/AAA
AA 6.5 8.499999 0.70% 0.00% Interest rate based upon coverage = 2.15%
A+ 5.5 6.499999 0.85% 0.00% Current rating for company = A3/A-
A 4.25 5.499999 1.00% 0.00% Current interest rate on debt = 3.05%
A- 3 4.249999 1.30% 0.00% Drop in operating income based on c 0.00%
BBB 2.5 2.999999 2.00% -5.00%
BB 2 2.2499999 4.00% -10.00%
B+ 1.75 1.999999 5.50% -10.00%
B 1.5 1.749999 6.50% -10.00%
B- 1.25 1.499999 7.25% -15.00%
CCC 0.8 1.249999 8.75% -25.00%
CC 0.65 0.799999 9.50% -25.00%
C 0.2 0.649999 10.50% -25.00%
D -100000 0.199999 12.00% -30.00%
 CAPITAL STRUCTURE 18

Current beta= 1.74 Current Equity= $24,531 Current Depreciation= $1,144

Current Debt= $9,615 Current EBITDA= $4,173 Current Interest rate ( 3.05%
Tax rate= 35.90% Current Rating= A3/A- Current T.Bond rate= 1.75%
Adjusted EBITDA = $4,173
WORKSHEET FOR ESTIMATING RATINGS/INTEREST RATES
D/(D+E) 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%
D/E 0.00% 11.11% 25.00% 42.86% 66.67% 100.00% 150.00% 233.33% 400.00% 900.00%
$ Debt $0 $3,415 $6,829 $10,244 $13,658 $17,073 $20,487 $23,902 $27,316 $30,731
Beta 1.39 1.49 1.61 1.77 1.98 2.28 2.79 3.78 5.77 11.54
Cost of Equity 11.08% 11.75% 12.58% 13.64% 15.07% 17.06% 20.44% 27.08% 40.45% 79.16%
% Drop in EB 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% -25.00% -25.00% -25.00% -25.00%
EBITDA $4,173 $4,173 $4,173 $4,173 $4,173 $4,173 $3,130 $3,130 $3,130 $3,130
Depreciation $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144
EBIT $3,029 $3,029 $3,029 $3,029 $3,029 $3,029 $1,986 $1,986 $1,986 $1,986
Interest $0 $73 $147 $220 $294 $418 $2,151 $2,689 $3,346 $3,765
Taxable Incom $3,029 $2,956 $2,882 $2,809 $2,735 $2,611 ($165) ($703) ($1,360) ($1,779)
Tax $1,087 $1,061 $1,035 $1,008 $982 $937 ($59) ($252) ($488) ($639)
Net Income $1,942 $1,895 $1,847 $1,800 $1,753 $1,673 ($106) ($451) ($872) ($1,140)
(+)Deprec'n $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144 $1,144
Funds from Op $3,086 $3,039 $2,991 $2,944 $2,897 $2,817 $1,038 $693 $272 $4

Pre-tax Int. co ∞ 41.26 20.63 13.75 10.32 7.24 0.92 0.74 0.59 0.53
Funds/Debt ∞ 0.89 0.44 0.29 0.21 0.17 0.05 0.03 0.01 0.00
Likely Rating Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aa2/AA C2/C Ca2/CC Caa/CCC Caa/CCC
Pre-tax cost of 2.15% 2.15% 2.15% 2.15% 2.15% 2.45% 10.50% 11.25% 12.25% 12.25%
Eff. Tax Rate 35.90% 35.90% 35.90% 35.90% 35.90% 35.90% 33.14% 26.51% 21.30% 18.94%
COST OF CAPITAL CALCULATIONS
D/(D+E) 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%
D/E 0.00% 11.11% 25.00% 42.86% 66.67% 100.00% 150.00% 233.33% 400.00% 900.00%
$ Debt $0 $3,415 $6,829 $10,244 $13,658 $17,073 $20,487 $23,902 $27,316 $30,731
Cost of equity 11.08% 11.75% 12.58% 13.64% 15.07% 17.06% 20.44% 27.08% 40.45% 79.16%
Cost of debt 1.38% 1.38% 1.38% 1.38% 1.38% 1.57% 7.02% 8.27% 9.64% 9.93%
Cost of Capital 11.08% 10.71% 10.34% 9.96% 9.59% 9.32% 12.39% 13.91% 15.80% 16.85%
0 0 0 0 0 1 0 0 0 0
Value (perpetu $30,632 $32,017 $33,532 $35,199 $37,039 $38,534 $19,681 $17,059 $14,638 $13,569

Interest cov Interest cov RATING Interest rate Drop in

 CAPITAL STRUCTURE 19

Low High EBITDA

-100000 0.199999 D2/D 13.75% -30.00%
0.2 0.649999 Caa/CCC 12.25% -25.00%
0.65 0.799999 Ca2/CC 11.25% -25.00%
0.8 1.249999 C2/C 10.50% -25.00%
1.25 1.499999 B3/B- 9.00% -15.00%
1.5 1.749999 Ba1/BB+ 8.25% -10.00%
1.75 1.999999 Ba2/BB 7.25% -10.00%
2 2.2499999 B1/B+ 5.75% -10.00%
2.25 2.49999 B2/B 4.75% -10.00%
2.5 2.999999 Baa2/BBB 3.75% -5.00%
3 4.249999 A3/A- 3.05% 0.00%
4.25 5.499999 A2/A 2.75% 0.00%
5.5 6.499999 A1/A 2.60% 0.00%
6.5 8.499999 Aa2/AA 2.45% 0.00%
8.5 100000 Aaa/AAA 2.15% 0.00%
 CAPITAL STRUCTURE 20

a perpetual growth rate.

Debt Ratio Beta Cost of EquityBond Rating
Interest rate on debtTax RateCost of Debt (after-tax)WACC
0% 1.39 11.08% Aaa/AAA 2.15% 35.90% 1.38% 11.08%
10% 1.49 11.75% Aaa/AAA 2.15% 35.90% 1.38% 10.71%
20% 1.61 12.58% Aaa/AAA 2.15% 35.90% 1.38% 10.34%
30% 1.77 13.64% Aaa/AAA 2.15% 35.90% 1.38% 9.96%
40% 1.98 15.07% Aaa/AAA 2.15% 35.90% 1.38% 9.59%
50% 2.28 17.06% Aa2/AA 2.45% 35.90% 1.57% 9.32%
60% 2.79 20.44% C2/C 10.50% 33.14% 7.02% 12.39%
70% 3.78 27.08% Ca2/CC 11.25% 26.51% 8.27% 13.91%
80% 5.77 40.45% Caa/CCC 12.25% 21.30% 9.64% 15.80%
90% 11.54 79.16% Caa/CCC 12.25% 18.94% 9.93% 16.85%
Firm Value (G)
$30,632
$32,017
$33,532
$35,199
$37,039
$38,534
$19,681
$17,059
$14,638
$13,569
 Rating is Yes/No IBC Type of firm
Aaa/AAA Yes High 1
Aa2/AA No Medium 2
A1/A Low
A2/A
A3/A-
Baa2/BBB
Ba1/BB+
Ba2/BB
B1/B+
B2/B
B3/B-
Caa/CCC
Ca2/CC
C2/C
D2/D
Not rated

Rating is Low IBC Medium High IBC

D2/D -30% -50.00% -100%
Caa/CCC -25% -40.00% -50%
Ca2/CC -25% -40.00% -50%
C2/C -25% -40.00% -50%
B3/B- -15% -25.00% -30%
Ba1/BB+ -10% -20.00% -25%
Ba2/BB -10% -20.00% -25%
B1/B+ -10% -20.00% -25%
B2/B -10% -20.00% -25%
Baa2/BBB -5% -10.00% -15%
A3/A- 0.00% -2.00% -5%
A2/A 0.00% 0.00% 0%
A1/A 0.00% 0.00% 0%
Aa2/AA 0.00% 0.00% -2%
Aaa/AAA 0% 0.00% -5%
Due in Amount Weight Weight* Maturity
0 3713 40.87% 0
1 1200 13.21% 0.13208586
2 700 7.71% 0.15410017
3 400 4.40% 0.13208586
5 500 5.50% 0.27517887
6 500 5.50% 0.33021464
8 400 4.40% 0.35222895
10 972 10.70% 1.06989543
25 400 4.40% 1.10071547
27 300 3.30% 0.89157953
Total 9085 100% 4.44
Estimation of Current Cost of Capital
Inputs
Equity
Number of Shares outstan 1747.22
Current Market Price per $ 14.04

Unlevered beta = 1.39

Riskfree Rate = 1.75%
Equity Risk Premium = 6.71%

Debt
Book Value of Straight D $ 9,085.00
Interest Expense on Debt $270.00
Average Maturity = 4.44
Pre-tax Cost of Debt = 3.05%
Tax Rate = 35%

Book Value of Convertibl 0

Interest Expense on Conve 0
Maturity of Convertible 0
Market Value of Converti 0

Debt value of operating l $ 558.65

Preferred Stock
Number of Preferred Shar 0
Current Market Price per 70
Annual Dividend per Shar 5

Output
Estimating Market Value of Straight De $9,055.96
Estimated Value of Straight Debt in Co $0.00
Value of Debt in Operating leases = $558.65
Estimated Value of Equity in Convertib $0.00
Levered Beta for equity = 1.74

Equity Debt Preferred Stock Capital

Market Value $24,530.97 $9,614.61 $0.00 $34,145.58
Weight in Cost of Capital 71.84% 28.16% 0.00% 100.00%
Cost of Component 13.45% 1.98% 7.14% 10.22%
If you are a multinational company and have a breakdown by country, you can use this table (for up to 10 countr
Country Revenues ERP Weight Weighted ERP
Argentina 19 14.80% 9.31% 1.38%
Bolivia 4 10.68% 1.96% 0.21%
Brazil 130 8.43% 63.73% 5.37%
Canada 23 5.80% 11.27% 0.65%
Chile 7 6.85% 3.43% 0.24%
Ecuador 6 16.30% 2.94% 0.48%
Paraguay 3 11.80% 1.47% 0.17%
Peru 12 8.43% 5.88% 0.50%
0.00% 0.00% 0.00%
0.00% 0.00% 0.00%
Total 204 100.00% 9.00%
If you are a multinational company and have a breakdown only by region, you can use this table instead
Region Revenues ERP Weight Weighted ERP
Africa 0 10.09% 0.00% 0.0000%
Australia & New Ze 0 5.80% 0.00% 0.0000%
Caribbean 12.57% 0.00% 0.0000%
Central and South A $4,784.83 9.18% 8.40% 0.7714%
Eastern Europe & Russia 8.48% 0.00% 0.0000%
Middle East 6.96% 0.00% 0.0000%
North America $28,231.00 5.80% 49.58% 2.8757%
Western Europe $9,569.67 6.85% 16.81% 1.1513%
Asia without Japan $14,354.50 7.58% 25.21% 1.9109%
Japan 0 6.85% 0.00% 0.0000%
Total 56940 100.00% 6.7092%

If you are a multi-business company, you can input the following

Business Revenues EV/Sales Estimated Va Unlevered Beta
Computers/Periphera $56,940.00 1.3800 $78,577.20 1.3900
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
0.0000 $ - 0.0000
Company $ 56,940.00 $78,577.20 1.3900
this table (for up to 10 countries)

use this table instead