PROBLEM 15-3 RISK ANALYSIS

a. Given the following information, calculate the expected value for Firm C’s EPS. Data for
Firms A and B are as follows: E(EPS A) = $5.10, σ A = $3.61, E(EPSB) = $4.20, σ B =
$2.96.

Probability
0.1 0.2 0.4 0.2 0.1
Firm A: EPSA ($1.50) $1.80 $5.10 $8.40 $11.70
Firm B: EPSB (1.20) 1.50 4.20 6.90 9.60
Firm C: EPSC (2.40) 1.35 5.10 8.85 12.60

Jawab:
Expected value EPS dari perusahaan C dapat dihitung sebagai berikut:
E(EPSC) = (0.1x($2.40)) + (0.2x$1.35) + (0.4x$5.10) + (0.2x$8.85) + (0.1x$12.60)
= -$0.24 + $0.27 + $2.04 + $1.77 + $1.26
= $5.10

b. You are given that σ C = $4.11. Discuss the relative riskiness of three firms’ earnings.

Jawab:
Untuk mengetahui risiko relatif pada ketiga perusahaan tersebut, perlu dihitung
Coefficient of Variation (CV) dari EPS dari setiap perusahaan. CV dapat dihitung dengan
membagi standar deviasi (σ ) dengan Expected EPS atau E(EPS).
σ
CV =
E( EPS)
CV untuk setiap perusahaan sebagai berikut:

Firm σ E(EPS) CV
A $3.61 $5.10 0.71
B 2.96 4.20 0.70
C 4.11 5.10 0.81

Berdasarkan hasil perhitungan tersebut, perusahaan C paling berisiko karena memiliki

nilai CV paling besar dibandingkan perusahaan yang lain. Sedangkan perusahaan A dan
B memiliki nilai CV yang hampir sama namun perusahaan A sedikit lebih berisiko
dibandingkan dengan perusahaan B. Perusahaan B yang paling tidak berisiko.

PROBLEM 15-8 HAMADA EQUATION

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Cyclone Software Co. is trying to establish its optimal capital structure. Its current capital
structure consists of 25% debt and 75% equity; however, the CEO believes that the firm
should use more debt. The risk-free rate, rRF, is 5%; the market risk premium, RPM, is 6%; and
the firm’s tax rate is 40%. Currently, Cyclone’s cost of equity is 14%, which is determined by
the CAPM. What would be Cyclone’s estimated cost of equity if it changed its capital
structure to 50% debt and 50% equity?

Jawab:
Dari soal diketahuti sebagai berikut:
Capital structure : 25% debt 75% equity
rRF : 5%
rM - rRF : 6%
T : 40%
rS : 14%

Langkah pertama hitung terlebih dahulu nilai beta saat ini, yaitu:
rS = rRF + (rM - rRF)b
14% = 5% + (6%)b
b = (14% - 5%) / 6%
b = 1.5

Langkah berikutnya adalah menghitung unlevered beta pada posisi capital structure 25%
debt dan 15% equity, yaitu:
bU = bL / [1 + (1-T)(D/E)]
= 1.5 / [1 + (1-0.4)(0.25/0.75)]
= 1.5 / 1.20
= 1.25

Kemudian hitung nilai levered beta pada posisi capital structure 50% debt dan 50% equity,
yaitu:
bL = bU [1 + (1-T)(D/E)]
= 1.25[1 + (1-0.4)(0.5/0.5)]
= 1.25 x 1.60
=2
Dengan menggunakan nilai bL pada struktur kapital yang baru, dapat dihitung nilai cost of
equity sebagai berikut:

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rS = rRF + (rM - rRF)b
= 5% + (6%)2
= 17%

PROBLEM 15-10 BREAKEVEN AND OPERATING LEVERAGE

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a. Given the following graphs, calculate the total fixed costs, variable costs per unit, and
sales price for Firm A. Firm B’s fixed costs are $120,000, its variable costs per unit are
$4, and its sales price is $8 per unit.

Jawab:
Firm A
1. Fixed costs = $80,000.
Breakeven sales−¿ Costs
2. Variable cost/unit =
Breakevenunits

$ 200,000−$ 80,000
=
25,000
= $4.8/unit
Breakeven sales
3. Selling price/unit =
Breakevenunits
$ 200,000
=
25,000
= $8.0/unit
Firm B
1. Fixed costs = $120,000.
Breakeven sales−¿ Costs
2. Variable cost/unit =
Breakevenunits

$ 240,000−$ 120,000
=
30,000
= $4.0/unit

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 Breakeven sales
3. Selling price/unit =
Breakevenunits
$ 240,000
=
30,000
= $8.0/unit

b. Which firm has the higher operating leverage at any given level of sales? Explain.
Jawab:
Firm B mempunyai operating leverage yang lebih tinggi akibat fixed costnya yang lebih
tinggi daripada Firm A. Jika fixed cost tinggi, maka penurunan penjualan yang kecil
sekalipun akan dapat menyebabkan penurunan yang besar pada ROIC. Fixed cost yang
tinggi tidak akan ikut menurun saat permintaan lesu (tidak seperti variable cost yang
mengikuti unit terjual) sehingga meningkatkan business risk dari perusahaan.

c. At what sales level, in units, do both firms earn the same operating profit?
Jawab:
Operating profit = Selling price x Units sold – Fixed costs – Variable costs/unit x Units
sold.
Misal, jumlah unit yang terjual = X.
Firm A’s operating profit = $8X – $80,000 – $4.8X
Firm B’s operating profit = $8X – $120,000 – $4.0X
Both firm earn the same operating profit:
$8X – $80,000 – $4.8X = $8X – $120,000 – $4.0X
-$0.8X = -$40,000
X = 50,000 units
Jadi, kedua perusahaan akan memiliki laba operasi yang sama pada saat tingkat penjualan
50,000 unit dengan total penjualan = $8.0 x 50,000 units
= $400,000
Pada tingkat penjualan tersebut, laba operasi yang diterima masing-masing perusahaan
adalah sama yaitu $80,000.
Operating profit for Firm A = ($8 x 50,000) – $80,000 – ($4.8 x 50,000)
= $400,000 – $80,000 – $240,000
= $80,000
Operating profit for Firm B = ($8 x 50,000) – $120,000 – ($4.0 x 50,000)
= $400,000 – $120,000 – $200,000

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 = $80,000

PROBLEM 15-11 RECAPITALIZATION

Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity.
Bloom's debt currently has an 8% yield to maturity. The risk-free rate (r RF) is 5%, and the
market risk premium (rM - rRF) is 6%. Using the CAPM, Bloom estimates that its cost of
equity is currently 12.5%. The company has a 40% tax rate.

a. What is Bloom's current WACC?

WACC = wdrd(1 – T) + wcrs
= (20%)(8%)(1 – 40%) + (80%)(12.5%)
= (0.2)(0.08)(0.6) + (0.8)(0.125)
= 0.0096 + 0.1
= 0.1096
= 10.96%

b. What is the current beta on Bloom's common stock?

The CAPM equation:
rs = rRF + (RPM)bi
rs = rRF + (rM - rRF)bi
12.5% = 5% + (6%)bi
0.125 = 0.05 + 0.06bi
0.125 – 0.05 = 0.06bi
0.075 = 0.06bi
bi = 0.075 / 0.06
bi = 1.25

c. What would Bloom's beta be if the company had no debt in its capital structure? (That is,
what is Bloom's unlevered beta, bU?)
bU = bL / [1 + (1 – T) (D/E)]
= 1.25 / [1 + (1 – 0.4) (0.2/0.8)]
= 1.25 / [1 + (0.6) (0.25)]
= 1.25 / [1 + 0.15]
= 1.25 / 1.15

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 = 1.087

Bloom's financial staff is considering changing its capital structure to 40% debt and 60%
equity. If the company went ahead with the proposed change, the yield to maturity on the
company's bonds would rise to 9.5%. The proposed change will have no effect on the
company's tax rate.

d. What would be the company's new cost of equity if it adopted the proposed change in
capital structure?
 bU = bL / [1 + (1 – T) (D/E)]
bL = bU x [1 + (1 – T) (D/E)]
= 1.087 x [1 + (1 – 0.4) (0.4/0.6)]
= 1.087 x [1 + (0.6) (0.67)]
= 1.087 x [1 + 0.402]
= 1.087 x 1.402
= 1.524
 rs = rRF + (rM - rRF)bi
= 0.05 + (0.06) (1.524)
= 0.05 + 0.091
= 0.141
= 14.1%

e. What would be the company's new WACC if it adopted the proposed change in capital
structure?
WACC = wdrd(1 – T) + wcrs
= (40%)(9.5%)(1 – 40%) + (60%)(14.1%)
= (0.4)(0.095)(1-0.4) + (0.6)(0.141)
= (0.4)(0.095)(0.6) + (0.6)(0.141)
= 0.0228 + 0.0846
= 0.107
= 10.7%

f. Based on your answer to part e, would you advise Bloom to adopt the proposed change in
capital structure? Explain.

Dengan mempertimbangkan WACCnya, sebaiknya perusahaan melakukan perubahan

sutruktur modal atau rekapitalisasi. Dengan dilakukannya rekapitalisasi, WACC akan

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turun dari 10,96% menjadi 10,7%. Rekapitalisasi akan mengakibatkan kenaikan nilai dari
perusahaan (firm value).