Market Value 50000

Equity 0.5 25000

Iteration 1 2 3 4 5
D/D+E 0.5
D/E 0.5
$ Debt 25000 25000 25000 25000
EBITDA 5000 5000 5000 5000 5000
Depreciation 2000 2000 2000 2000 2000
EBIT 3000 3000 3000 3000 3000
Interest Expense 0 1300 1750 2062.5 2313
Pre-tax Int. cov ∞ 2.30769 1.7143 1.4545 1.297
Likely Rating AAA BB B B- B-
Interest Rate 5.20% 7.00% 8.250% 9.25% 9.25%

5.20% 25000
8.25% x
15758
He will be able t ### at BB rating

In the worst case scenari 15758

26.3% at B rating
 100% 50000
0.5 25000 Debt 50.00%

Equity
comes
down to 50.0000%
The firm is getting credit at the rate of 7%
If B is considered risky he will get interest at the rate of 8.25%

480769 at 5.20 25000 The firm is able to raise the firm buys back 50% stakes
303030 at 7% 18571.43 This is what the firm will raise
at 18571 the firm will fetch
at BB rating 25000 50% 50000
18571 0.37142 37.14% stakes

at B rating
uys back 50% stakes

100%
37.14% stakes