Question: Cede Co expects its EBIT to be 57 500 every
Cede & Co. expects its EBIT to be $57,500 every year forever. The firm can borrow at 8 percent. Cede currently has no debt, and its cost of equity is 15 percent. If the tax rate is 35 percent, what is the value of the firm? What will the value be if the company borrows $120,000 and uses the proceeds to repurchase shares?
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