The market value of a company with $500,000 debt is $1,700,000. EBIT are expected to be a perpetuity. The pretax interest rate on debt is 10%. The company is in the 34% tax bracket. If the company were 100 % equity financed, the equity shareholders would require a 20% return. 

a. What would the value of the firm be if it were financed entirely with equity? 

b. What is the net income to the stockholders of the levered firm?

Answer rating: 100% (QA)

a Value levered Value unlevered Debt tax rate Value unlevered 170... View the full answer