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(10) This is a world with NO TAXES (perfect capital markets). The firm is a no growth firm and pays out all of its earnings
- (10) This is a world with NO TAXES (perfect capital markets). The firm is a no growth firm and pays out all of its earnings as dividends. It is originally all equity financed (unlevered). The firm decides to issue $500,000 in debt to repurchase stock. The cost of debt is 4%. Fill in ALL the missing values in the table.
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| Unlevered | Levered |
| EBIT | 200,000 | 200,000 |
| INTEREST |
|
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| Earnings (Net Income) |
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| #Shares | 20,000 |
|
| Ru | 8% | 8% |
| RE |
|
|
| EPS |
|
|
| Price |
|
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| Value of the Firm |
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|
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Short Term Financial Management
Authors: Ned C. Hill, William L. Sartoris
3rd Edition
0023548320, 978-0023548321
