Company L perpetual debt is $1,500,000 and Cost of Debt is 5% while Company U is...

Transcribed Image Text:

Company L perpetual debt is $1,500,000 and Cost of Debt is 5% while Company U is unlevered. Expected EBIT for both firms is $3,000.000 forever and earnings are paid in dividend. Company L and Company U are otherwise identical. Assume the corporate tax rate for both firms is 35% and all the M&M assumptions are satisfied. If company U's WACC is 15%, and investors are taxed 20% on equity income and 30% on debt income. What is the value of company L?. Company L perpetual debt is $1,500,000 and Cost of Debt is 5% while Company U is unlevered. Expected EBIT for both firms is $3,000.000 forever and earnings are paid in dividend. Company L and Company U are otherwise identical. Assume the corporate tax rate for both firms is 35% and all the M&M assumptions are satisfied. If company U's WACC is 15%, and investors are taxed 20% on equity income and 30% on debt income. What is the value of company L?.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The value of company L is 172... View the full answer