Meyer & Co. expects its EBIT to be $110,000 every year forever. The firm can borrow at
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Question:
Meyer & Co. expects its EBIT to be $110,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 14 percent. |
a. | If the tax rate is 24 percent, what is the value of the firm? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What will the value be if the company borrows $230,000 and uses the proceeds to repurchase shares? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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