Question: (CHAPTER 16) (For this problem, assume that all Miller-Modigliani assumptions hold.) Apples & Oranges is currently an all-equity firm. Its management expects its Earnings
(CHAPTER 16) (For this problem, assume that all Miller-Modigliani assumptions hold.) Apples & Oranges is currently an all-equity firm. Its management expects its Earnings Before Interest and Taxes to equal $310,000 every year in the future. Its cost of equity is 10%. The firm faces a 40% tax rate for all of its taxable income each year. Apples & Oranges is contemplating taking a $230,000 loan at 4.50% annual interest rate. The values in the table below are related to the firm's valuation. Fill it out! Round all dollar values to WHOLE dollar, and do NOT use the "$" signs. (You can type with or without the commas.) Firm's total value $ If the firm remains all-equity If the firm takes the $230,000 loan Firm's debt value $ EA Firm's equity value $ SA HINT: You won't need to use one of the numbers that is given.
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