Old School Corporation expects an EBIT of $15,000 every year forever. Old School currently has no debt,

Question:

Old School Corporation expects an EBIT of $15,000 every year forever. Old School currently has no debt, and its cost of equity is 17 percent. The firm ca borrows at 10 percent. If the corporate tax rate is 35%, what is the value of the firm? What will the value be if Old School converts to 50 percent debt? To 100 percent debt?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...