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a. Casablanca Corporation, currently has no debt, expects an EBIT of $39,500 every year forever. Its cost of equity is 20 percent. The corporate tax
a. Casablanca Corporation, currently has no debt, expects an EBIT of $39,500 every year forever. Its cost of equity is 20 percent. The corporate tax rate is 35 percent. The company can borrow at 10 percent. What is the current value of the company? b. What will the value of the firm be if the company takes on debt equal to 40 percent of its unlevered value? What if it takes on debt equal to 90 percent of its unlevered value? What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? What if the company takes on debt equal to 100 percent of its levered value? c
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