Question: Fields & Co . expects its EBIT to be $ 1 2 5 , 0 0 0 every year forever. The firm can borrow at

Fields & Co. expects its EBIT to be $125,000 every year forever. The firm
can borrow at 7 percent. The company currently has no debt, and its cost
lof equity is 12 percent. If the tax rate is 24 percent, what is the value of
the firm? What will the value be if the company borrows $205,000 and
uses the proceeds to repurchase shares?
I
Fields & Co. expects its EBIT to be $125,000 every year

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