Question: Please indicate correct answer only no explanation Use the following information to answer questions 15-17 Bruce & Co. expects its EBIT to be $100,000 every
Use the following information to answer questions 15-17 Bruce & Co. expects its EBIT to be $100,000 every year forever. The firm can borrow at 1 percent. Bruce currently has no debt, and its cost of equity is 18 percent. The tax rate is 31 percent. Bruce will borrow $61,000 and use the proceeds to repurchase shares, which is referred to as the recapitalization 15. What is the value of the firm currently? A. $18,910 B. $61,000 C. $100,000 D. $383,333.33 E. $402,243.33 16. What is the present value of the tax shield? A. $18,910 B. $61,000 C. $100,000 D. $383,333.33 E. $402,243.33 17. What will the firm value be after the recapitalization? A. $18,910 B. $61,000 C. $100,000 D. $383,333.33 E. $402,243.33
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
