Meyer & Co. expects its EBITDA to be $108,000 per year forever. The firm can borrow at a rate of 6 percent. The company currently has no debt and the cost of equity is 12 percent. 

A. What is the value of the firm if the tax rate is 22 percent? (Do not round up intermediate calculations and round your answer to 2 decimal places, eg 32.16.)

 b. What would be the value if the company borrowed $220,000 and used the proceeds to buy back shares? (Do not round up intermediate calculations and round your answer to 2 decimal places, eg 32.16.)

Answer rating: 100% (QA)

Answer a Value of Unlevered Firm EBIT 1 Tax Rate Cost of Equity Value of Un... View the full answer