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A company just issued $ 1 1 0 0 0 0 of perpetual 9 % debt and used the proceeds to repurchase stock. The company

A company just issued $

110000

of perpetual

9 %

debt and used the proceeds to

repurchase stock. The company expects to generate

100000

of EBIT in perpetuity.

The company distributes all its earnings as dividends at the end of each year. The

firm's unlevered cost of capital is

13 %

and the tax rate is

15 % .

Use APV method to

calculate the value of the company with leverage.

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