Executive Summary
Capital structure optimisation analysis for Rolls-Royce assessing the interaction between debt levels, WACC, enterprise value, and equity value.
Objective
To understand how capital structure dynamics affect firm value and equity upside.
Approach
- —Analysed current capital structure and debt characteristics
- —Modelled WACC across different debt/equity scenarios
- —Assessed enterprise value and share price sensitivity
- —Identified optimal capital structure range
Key Outputs
- —Capital structure scenario analysis
- —WACC vs. debt level relationship
- —Firm value and share value charts
- —Optimal leverage assessment
Commercial Insight
In leveraged situations, equity behaves like a call option on enterprise value. Understanding the interaction between operating recovery and capital structure is essential.
Tools & Methods
ExcelScenario AnalysisCapital Structure Modelling