North Inc has a perpetual expected EBIT of $200. The interest rate on debt is 12%. Assume
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Question:
North Inc has a perpetual expected EBIT of $200. The interest rate on debt is 12%. Assume that there are no taxes.
a. what is the value of North Inc if the debt/equity ratio is .25 and its weighted average cost of capital is 16%?
What's the value of North's equity?
What is the value of North's debt?
What is the firm's cost of equity?
b. Suppose the corporate tax is 30% and North has $400 in debt outstanding. If the unlevered cost is 20%, what's the value of North?
What is the value of the firm's equity?
What is the Wacc?
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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