Galaxy Mobile expects an EBIT of $20,000 every year in perpetuity. The firm currently has no debt, and its cost of equity is 15 percent. The tax rate is 40 percent. The firm plans to borrow money to repurchase its stock such that the debt- value ratio after the restructuring becomes 50 percent permanently. What is the firm value if the firm borrows at 8 percent?

Answer rating: 100% (QA)

1 Calculate the unlevered value EBIT 20000 Cost of equity Ke 15 Tax rate T 40 Unlevered value VU EBI... View the full answer