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.)

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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.)

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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.)

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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.)

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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.)

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Answer rating: 100% (QA)

a The current value of the company is calculated as the unlevered value of the company which is the value of the company with no debt Unlevered value ... View the full answer