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Posted on Jul 20, 2024

Strawberry Inc. has historically been an all-equity firm. The analyst expects EBIT to be $1.5B in perpetuity starting one year from now. The cost of

Strawberry Inc. has historically been an all-equity firm. The analyst expects EBIT to be $1.5B in perpetuity starting one year from now. The cost of equity for the company is 11.5% and the tax rate is 35%. Suppose that the company borrows $3B and uses the funds to repurchase shares.

What is the value of the firm if the present value of financial distress costs is $0.7B?

PLEASE ANSWER ASAP!!!!

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