Question: Pumpkin Patch Corp. ( PPC ) is an all - equity firm with EBIT of $ 2 2 5 , 0 0 0 and an

Pumpkin Patch Corp. (PPC) is an all-equity firm with EBIT of $225,000 and an unlevered cost of capital of 16%. Management at PPC decides to add permanent debt with a market value of $850,000 to the capital structure. The cost of debt is 8% and the tax rate is 34%. What is the new value of the levered firm? (hint ans is
$1,217,125)

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