Nama : farihatul dwi khasanah

NIM 5180211498
Kelas : MK 2 D

Melengkapi optimal capital structure case.

Chapter 14. Ch 14-07 Build a Model

Elliott Athletics is trying to determine its optimal capital structure, which

now consists of only debt and common equity. The firm does not currently use
preferred stock in its capital structure, and it does not plan to do so in the future.
To estimate how much its debt would cost at different debt levels, the company's
Treasury staff has consulted with investment bankers and, on the basis of those
discussions, has created the following table:
Market Market Market
Debt/Value Equity/Value Debt/Equity Debt B-T Cost of
Ratio (wd) Ratio (wc) Ratio (D/S) Rating Debt (rd)
0 1 0,00 A 7,00%
0,2 0,8 0,25 BBB 8,00%
0,4 0,6 0,67 BB 10,00%
0,6 0,4 1,50 C 12,00%
0,8 0,2 4,00 D 15,00%
Elliott uses the CAPM to estimate its cost of common equity, rs. The
company estimates that the risk-free rate is 5 percent, the market risk premium is 6
percent, and its tax rate is 40 percent. Elliott estimates that if it had no debt, its
"unlevered" beta, BU, would be 1.2.

a. Based on this information, what is the firm's optimal capital structure, and
what would the weighted average cost of capital be at the optimal structure?
Solution to Part a:
Inputs provided in the problem:
Risk-free rate 5%
Market risk premium 6%
Unlevered beta 1,2
Tax rate 40%
Next, we construct a table (like that in the model) that evaluates WACC at
different levels of debt.

The beta is found using the Hamada equation:

bL = bU [1+ (1-T)(D/S)]
In Excel format, here is the equation for bL with 10% debt: 1,2
bL = bU [1+ (1-T)(D/S)]
=1,2(1+(1+40%)(0,25)
=1,38
Then, with bL, we can apply the CAPM equation to find rs, the cost of
equity, and then we can find the WACC.
bL = bU [1+ (1-T)(D/S)]
A-T rd = rd(1-T)
rs = rRF + b(rM-rRF)
WACC = wd(rd)(1-T) + ws(rs).
A-T Cost
Debt/Value Equity/Value Debt/Equity of Leveraged Cost of D/A at min
Ratio (wd) Ratio (wc) Ratio (D/S) Debt (rd) Beta Equity WACC WACC
0,0 1,0 0,00 4,20% 1,20 12,20% 12,20% 0,0
0,2 0,8 0,25 4,80% 1,38 13,28% 11,58% 0,2
0,4 0,6 0,67 6,00% 1,68 15,08% 11,45% 0,4
0,6 0,4 1,50 7,20% 2,28 18,68% 11,79% 0,6
0,8 0,2 4,00 9,00% 4,08 29,48% 13,10% 0,8
From the table, we see that the optimal capital structure consists of 40% debt and
60% equity.
Using Excel's Minimum function, we find the Min WACC to be: 11,45%
Using MAX, find the WACC minimizing D/A ratio: 40%
b. Plot a graph of the A-T cost of debt, the cost of equity, and the WACC versus
the Debt/Value ratio.
Capital costs versus D/V Ratio.
 Capital cost Vs D/E
40,00%

30,00%

20,00%

10,00%
0 1 2 3 4 5 6
0,00%
A-T Cost of Debt (rd) Cost of Equity Cost of WACC

35,00%
30,00%
25,00%
20,00%
15,00% A-T Cost of Debt (rd)
10,00% Cost of Equity Cost of WACC
5,00%
0,00%
0,0 0,2 0,4 0,6 0,8

Capial Cost Vs D/A

c. Would the optimal capital structure change if the unlevered beta changed? To
answer this question, do a sensitivity analysis of WACC on bU for different levels
of bU.
Set up a data table where you find WACC at different values of bU. Then create
graphs of WACC vs. bu and Optimal Cap. Str. Vs bu.
WACC at
Optimal Optimal
Unleveraged Cap. Str. D/A Ratio
Beta 11,45% 40%
0 4,96% 20%
0,6 8,27% 20%
1,2 11,45% 40%
1,6 13,46% 40%
2,2 16,35% 60%
 WACC Vs bU
17,0%
15,0%
13,0%
11,0%
9,0%
7,0%
5,0%
0 00,5 1 1,5 2

00 0,5 1 1,5 2

Menyusun perencanaan dan perhitungan struktur modal optimal dengan

data yang dibuat kelompok.
SOAL STRUKTUR MODAL
Hitunglah struktur modal optimal dengan informasi perhitungan sebagai berikut :
Expected EBIT = Rp. 12.000,000. Firm expects zero growth. 6.000,000 shares
outstanding;

rs = 15%; P0 = $50; T = 50%; b = 1.2; rRF =20%; RPM =15% dengan proporsi
(persentase) hutang setidaknya 0%; 10%; 20; 40%; 40% dan 50% . Diketahui :
Expected EBIT = Rp. 3.000,000.
Firm expects zero growth. 1000,000 shares outstanding;
rs = 15%;
B = 1.2
P0 = $50;
rRF = 20%;
T = 50%;
RPM =15%

Proporsi (persentase) hutang setidaknya 0%; 10%; 20; 40%; 40% dan 50% .
Estimates of Cost of Debt
Market Market Market
Debt/Value Equity/Value Debt/Equity Debt B-T Cost of
Ratio (wd) Ratio (wc) Ratio (D/S) Rating Debt (rd)
0 1 0,00 A 6,00%
0,1 0,8 0,11 BBBB 8,00%
0,2 0,7 0,20 BBB 9,00%
0,4 0,5 0,60 BB 11,00%
0,6 0,4 1,50 C 13,00%
0,8 0,2 4,00 D 15,00%

Cost of Equity vs. Leverage and WACC vs. Leverage

A-T Cost
Debt/Value Equity/Value Debt/Equity of Leveraged Cost of D/A at min
Ratio (wd) Ratio (wc) Ratio (D/S) Debt (rd) Beta Equity WACC WACC
0 1 0 3% 1,2 38% 0,38 0

0,1 0,8 0,11 4% 0,055 20,825% 0,1906 0,1

0,2 0,7 0,20 4,5% 1,32 39,8% 0,4034 0,2

0,4 0,5 0,60 5,5% 1,56 43,4% 0,2302 0,4

0,6 0,4 1,50 6,5% 2,1 51,5% 0,2294 0,6

0,8 0,2 4,00 7,5% 3,6 74% 0,184 0,8
 SOAL KE 2 Mencari Bank yang terdaftar di Bursa Efek Indonesia serta
jelaskan jenis-jenis pinjaman yang bisa diperoleh perusahaan dan cara
mendapatkan pinjaman
1. Pilihlah salah satu Bank yang terdaftar di Bursa Efek Indonesia serta jelaskan jenis-jenis
pinjaman yang bisa diperoleh perusahaan serta bagaimanakah cara mendapatkan
pinjaman tersebut.
Jawab :