Asian FoodTech Corporation has a debt-equity ratio of 0.40. The required return on the company's unlevered equity is 13% and the pretax cost of the company's debt is 6%. Sales revenue for the company is expected to remain stable indefinitely at last year's level of RM20 million. Variable costs amount to 65% of sales. The tax rate is 25% and the company distributes all its earnings as dividends at the end of each year. BWFF5053 CONFIDENTIAL CONFIDENTIAL 

a) If the company were financed entirely by equity, how much would it be worth? 

b) What is the required return on the firm's levered equity? (2 marks) c) Use WACC method to calculate the value of the company

Answer rating: 100% (QA)

Answer a If the company were financed entirely by equity the value of the firm would be equal to the present value of its unlevered aftertax earnings ... View the full answer