Question: Tool Manufacturing has an expected EBIT of 73 000 in perpetuity
Tool Manufacturing has an expected EBIT of $73,000 in perpetuity and a tax rate of 35 percent. The firm has $145,000 in outstanding debt at an interest rate of 7.25 percent, and its unlevered cost of capital is 11 percent. What is the value of the firm according to M&M Proposition I with taxes? Should the company change its debt–equity ratio if the goal is to maximize the value of the firm? Explain.
Answer to relevant QuestionsCavo Corporation expects an EBIT of $19,750 every year forever.The company currently has no debt, and its cost of equity is 15 percent.a. What is the current value of the company?b. Suppose the company can borrow at 10 ...Red Rocks Corporation (RRC) currently has 425,000 shares of stock outstanding that sell for $80 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:a. RRC has a five-for-three ...National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment ...The following is the sales budget for Kulp, Inc., for the first quarter of 2012:Credit sales are collected as follows:65 percent in the month of the sale20 percent in the month after the sale15 percent in the second month ...In a typical month, the Hampton Corporation receives 80 checks totaling $139,000. These are delayed four days on average. What is the average daily float? Assume 30 days in a month.
Post your question