Question: AAB Corp. expects its EBIT to be $ 8 3 0 , 0 0 0 every year forever. The firm can borrow at 8 %

AAB Corp. expects its EBIT to be $830,000 every year forever. The firm can borrow at 8%. The company currently has no debt, and its cost of equity is 13%. Assume the tax rate is 0%.
(a) What is the value of the firm?
(b) If the company borrows $125,000 and uses the proceeds to repurchase shares, what will be the firm value? What about its cost of equity and WACC?

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