A firm has an operating profit of $300,000, interest of $35,000, and a tax rate of 40
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A firm has an operating profit of $300,000, interest of $35,000, and a tax rate of 40 percent. The firm has an after tax cost of debt of 5 percent and a cost of equity of 15 percent. The firm's target capital structure is set at a mix of 40 percent debt and 60 percent equity. Assuming this as the optimum capital structure, the value of the firm is
a. 1.4 mil
b. 6 mil
c. 2.2 mil
d. 1.8 mil
Related Book For
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta
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