Question
An all equity company's cost of capital is 13.4 per cent and its value is $38 million. The company is paying 37 per cent tax.
An all equity company's cost of capital is 13.4 per cent and its value is $38 million. The company is paying 37 per cent tax. The company takes debt to reduce ordinary shares to have debt equity ratio of 1. Yield to maturity of the debt is 10.4 per cent. What is the new value of equity for the company?
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Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
