Question
Analysts expect the Rumpel Felt Company to generate EBIT of $ 9.6million annually in perpetuity (starting in one year). Rumpel is all equity financed and
Analysts expect the Rumpel Felt Company to generate EBIT of $ 9.6million annually in perpetuity (starting in one year). Rumpel is all equity financed and its stockholders require a return of 4.6%.
The value of Rumpel is $208.7million. If Rumpel borrows $80million (interest-only in perpetuity) with a cost of debt of 2.1%,
then what will the equity be worth?Note:Assume that there are no taxes.
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International Finance Transactions Policy And Regulation
Authors: Hal Scott, Anna Gelpern
23rd Edition
1647084105, 978-1647084103
