Question
Auto Heating Corp. has expected earnings before interest and taxes (EBIT) of $100,000, an unlevered cost of capital of 15 percent. Now, the firm is
Auto Heating Corp. has expected earnings before interest and taxes (EBIT) of $100,000, an unlevered cost of capital of 15 percent. Now, the firm is considering to increase its leverage by issuing a debt of $200,000 to repurchase the stocks. The corporate tax rate is 40 percent. What is the value of the firm after leverage?
| A. | $350,000 | |
| B. | $412,250 | |
| C. | $480,000 | |
| D. | $525,000 | |
| E. | $550,250 |
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Mathematics Of Finance
Authors: Robert Brown, Steve Kopp, Petr Zima
8th Edition
0070876460, 978-0070876460
