Question: Hey could someone help me with this problem and provide detail on how you were able tk solve it. I need parts 1-5 please and
Suppose the corporate tax rate is 25%. Consider a firm that earns $2,500 in eamings before interest and taxes each year with no risk. The firm's capital expenditures equal its depreciation expenses each year, and it will have no changes to its net working capital. The riskfree interest rate is 4%. a. Suppose the firm has no debt and pays out its net income as a dividend each year. What is the value of the firm's equity? b. Suppose instead the firm makes interest payments of 5700 per year. What is the value of equity? What is the value of debt? c. What is the difference between the total value of the firm with leverage and without leverage? d. To what percentage of the value of the debt is the difference in part (c) equal? a. Suppose the firm has no debt and pays out its net income as a dividend each year What is the value of the firm's equity? If the firm has no debt and pays out its net income as a dividend each year, the value of the firm's equity is? (Round to the nearest dollari)
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