Elzear & Co. expects its EBIT to be $58,000 every year forever. The firm can borrow...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Elzear & Co. expects its EBIT to be $58,000 every year forever. The firm can borrow at 9%. Elzear currently has no debt, and its cost of equity is 12%. (Round the final answers to 2 decimal places. Omit $ sign in your response.) If the tax rate is 35%, what is the value of the firm? Value of the firm What will the value be if the company borrows $180,000 and uses the proceeds to repurchase shares? Value of the firm. Elzear & Co. expects its EBIT to be $58,000 every year forever. The firm can borrow at 9%. Elzear currently has no debt, and its cost of equity is 12%. (Round the final answers to 2 decimal places. Omit $ sign in your response.) If the tax rate is 35%, what is the value of the firm? Value of the firm What will the value be if the company borrows $180,000 and uses the proceeds to repurchase shares? Value of the firm.
Expert Answer:
Answer rating: 100% (QA)
a Value of Firm EBIT 1 t Cost of Equity 58000 1 035 012 31416667 b Value of leve... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
Students also viewed these finance questions
-
Debbies Sod Farm (DSF) expects its EBIT to be $2,250 this year. DSFs marginal tax rate is 40 percent, it must pay $1,000 in interest this year, and it has 500 shares of common stock outstanding. (a)...
-
The Gupta Companys cost of equity is 16 percent. Its before-tax cost of debt is 13 percent, and its marginal tax rate is 40 percent. The stock sells at book value. Using the following balance sheet,...
-
The Callaway Company's cost of equity is 22%. Its before-tax cost of debt is 13%, and its marginal tax rate is 40%. The firm's capital structure calls for a debt-to-equity ratio of 45%. Calculate...
-
Cherokee Company had an accounts receivable balance of $16,000 on December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales...
-
Data are presented in the following table of rates of return on investment and residual incomes: Determine the missing items, identifying each item by the appropriateletter. Minimum Rate of Return on...
-
Why should objectives, strategies and tactics be cascading?
-
The steel bar AB of the frame is assumed to be pin connected at its ends for \(y-y\) axis buckling. If \(P=18 \mathrm{kN}\), determine the factor of safety with respect to buckling. Take...
-
Data related to the expected sales of laptops and tablet PCs for Tech Products Inc. for the current year, which is typical of recent years, are as follows: The estimated fixed costs for the current...
-
The hip roof shown in the below Figure 2 is constructed of 2x10 rafters spaced 16 inches on center. The hip rafters are 1 -inch-wide by 12-inch-high GLBs. The roof has a slope of 4:12. Prepare a list...
-
Kat Ltd.s September balance sheet contains the following information: Cash.............................................................................$ 37,500 (dr) Accounts...
-
A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000...
-
An IBM Bond pays return $225 every January for 5 years. In December 2020 it pays an additional $2500 and retires the bond. The bond is rated AAA (WSJ AAA YTM is 10 %). If today is January 2016, what...
-
Mead Plastics data regarding cost of capital is as follows: Bonds Yield to Maturity is 13% Preferred Stock value is $70 Common Stock value is $50 Dividends in Preferred Stocks are $7.15 Last year...
-
Determine the acceptability of the project using payback period. Year Project "Y" 10 (25,000) 1st year 1,500 2nd Year 2,500 3rd year 5,000 4th year 10,000 5th Year 12,000
-
Huawei is growing steadily, and investors expect both the stock price and the dividend to increase at 8% per year. Three investors Ahmed, Badar and Khalid are interested to invest in Huawei's shares....
-
Orange manufactures two types of smartphone: Selling Price Variable Cost LF120 $410 LE200 $440 $290 $305 1 unit LF120 production requires 2 machine hours, 1 unit of LE200 requires 3 machine hours....
-
Fresh Looks is a beauty salon that uses organic products to minimize the environmental impact of chemical-based products. It uses natural soaps and shampoos and other vegan beauty products, such as...
-
Find the velocity, acceleration, and speed of a particle with the given position function. r(t) = (t 2 , sin t - t cos t, cos t + t sin t), t > 0
-
Suppose we are thinking about replacing an old computer with a new one. The old one cost us $450,000; the new one will cost $580,000. The new machine will be depreciated straight-line to zero over...
-
You own a lot in Key West, Florida, that is currently unused. Similar lots have recently sold for $1.1 million. Over the past five years, the price of land in the area has increased 12 percent per...
-
Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.5 percent. Information about those factors is presented in the following...
-
_____________ is also used as requirement finding and feasibility testing tool. (a) Prototype (b) Reports (c) System (d) Procedure
-
A prototype can be ___________. (a) Complete system with partial requirements (b) Working model (c) Full-fledged system (d) All of these
-
Which of the following systems development approach is adopted if information requirements are not well defined? (a) SDLC (b) Prototype (c) Structured approach (d) Agile
Study smarter with the SolutionInn App