Cavo Corporation expects EBIT of $17,100 each year forever. The company currently has no debt and its
Question:
Cavo Corporation expects EBIT of $17,100 each year forever. The company currently has no debt and its cost of capital is 10 percent. The corporate tax rate is 35 percent. |
a. | What is the current value of the company? (Do not round intermediate calculations and round your answer to 2 decimal places, for example, 32.16.) |
company value | ps |
b-1. | Suppose the company can borrow at 7 percent. What will the company be worth if it takes on debt equal to 50 percent of its unleveraged value? (Do not round intermediate calculations and round your answer to 2 decimal places, for example, 32.16.) |
company value | ps |
b-2. | Suppose the company can borrow at 7 percent. What will the company be worth if it takes on debt equal to 100 percent of its unleveraged value? (Do not round intermediate calculations and round your answer to 2 decimal places, for example, 32.16.) |
company value | ps |
c-1. | What will the company be worth if it takes on debt equal to 50 percent of its leveraged value? (Do not round intermediate calculations and round your answer to 2 decimal places, for example, 32.16.) |
company value | ps |
c-2. | What will the company be worth if it takes on debt equal to 100 percent of its leveraged value? (Do not round intermediate calculations and round your answer to 2 decimal places, for example, 32.16.) |
company value | ps |
Fundamentals of corporate finance
ISBN: 978-0078034633
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan