Question
Banana Airways. has an expected EBIT of $1,515,000 in perpetuity and a tax rate of 25%. The Bananas Air management is paying 6.25% interest for
Banana Airways. has an expected EBIT of $1,515,000 in perpetuity and a tax rate of 25%. The Bananas Air management is paying 6.25% interest for a $6,666,000 outstanding bond. Assuming unlevered cost of capital (Ru) is 9.19%. a. Evaluate the firm using Modigliani and Miller's approach (Case (II), Proposition (I) with taxes)? (4 marks) b. Find the equity value and D/E ratio? (4 marks)
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Financial Sector Reform And Privatization In Transition Economies
Authors: John Doukas, Victor Murinde, Clas Wihlborg
1st Edition
044482653X, 9780444826534
