Roxy Broadcasting has an annual EBIT of $3,500,000 and a WACC of 14%. The current tax rate

Question:

Roxy Broadcasting has an annual EBIT of $3,500,000 and a WACC of 14%. The current tax rate is 40%. Roxy will have the same EBIT forever. The company currently has debt of $6,250,000 with a of 14%. Roxy will sell $12,500,000 more of debt and retire stock with the proceeds. What is the value of equity in the higher levered firm? What is the government’s value in the higher levered firm?

Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...