Tool Manufacturing has an expected EBIT of $51,600 in perpetuity and a tax rate of 24 percent.
Question:
Tool Manufacturing has an expected EBIT of $51,600 in perpetuity and a tax rate of 24 percent. The firm has $90,000 in outstanding debt at an interest rate of 6.5 percent, and its unlevered cost of capital is 11 percent. What is the value of the firm according to MM Proposition I with taxes? Should the firm change its debt-equity ratio if the goal is to maximize the value of the firm? Explain
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Related Book For 
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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