Aswath Damodaran 329
A Test: Can you do the 20 % level?
D/(D+E) 0. 00 % 10. 00 % 20. 00 % 2 nd Iteration 3 rd?
D/E 0. 00 % 11. 11 %
$ Debt $ 0 $ 6 , 977
EBITDA $ 3 , 882 $ 3 , 882
Depreciation $ 1 , 077 $ 1 , 077
EBIT $ 2 , 805 $ 2 , 805
Interest $ 0 $ 303
Pre-tax Int. cov " 9. 24
Likely Rating AAA AAA
Cost of debt 4. 35 % 4. 35 %
D/(D+E) 0 .00% 1 0.00% 2 0.00% Second Iteration
D/E 0 .00% 1 1.11% 2 5.00%
$ Debt $ 0 6 , 977 $13, 954
EBITDA. $3, 882 $3, 882 $3, 882
Depreciation $1, 077 $1, 077 $1, 077
EBIT $5, 559 2 ,805$ 2 , 805 $2, 805
Interest $ 0 $ 303 $ 606 $
677 $ 698
Int. cov " 9 .24 4 .62
4 .14 4 .02
Likely Rating AAA AAA A A- A-
Interest Rate 4 .35% 4 .35% 4 .85% 5 .00%
