4. ABC Ltd. expects it EBIT to be $90,000 every year forever. The firm can borrow at 8%. It has no debt and the cost
4. ABC Ltd. expects it EBIT to be $90,000 every year forever. The firm can borrow at 8%. It has no debt and the cost of equity is 16%. If the tax rate is 22%, what is the value of the firm? What will the value be if it borrows $50,000 and repurchase the outstanding shares and the cost of equity, WACC after recapitalization? (25 points)
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Authors: Roger Staiger
2nd Edition
1138046183, 978-1138046184
